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<SEC-DOCUMENT>0001019687-03-002557.txt : 20031229
<SEC-HEADER>0001019687-03-002557.hdr.sgml : 20031225
<ACCEPTANCE-DATETIME>20031229060830
ACCESSION NUMBER:		0001019687-03-002557
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		10
CONFORMED PERIOD OF REPORT:	20030930
FILED AS OF DATE:		20031229

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			AMERICAN TECHNOLOGY CORP /DE/
		CENTRAL INDEX KEY:			0000924383
		STANDARD INDUSTRIAL CLASSIFICATION:	HOUSEHOLD AUDIO & VIDEO EQUIPMENT [3651]
		IRS NUMBER:				870361799
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0930

	FILING VALUES:
		FORM TYPE:		10-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-24248
		FILM NUMBER:		031074065

	BUSINESS ADDRESS:	
		STREET 1:		13114 EVENING CREEK DRIVE SOUTH
		CITY:			SAN DIEGO
		STATE:			CA
		ZIP:			92128
		BUSINESS PHONE:		6196792114
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>atco_10k-093003.htm
<TEXT>
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<p>&nbsp;</p> </div> </div> <BR>
<p style=' margin-bottom:0pt;text-align:center; margin-top:0pt;'><b><font SIZE=4>UNITED STATES</font></b></p>
<p style=' margin-bottom:0pt;text-align:center; margin-top:0pt;'><b><font SIZE=4>SECURITIES AND EXCHANGE COMMISSION</font></b></p>
<p style=' margin-bottom:0pt;text-align:center; margin-top:0pt;'><b><font size=2>Washington, D.C. 20549<br>
</font>
<font SIZE=5>FORM 10-K<br>
</font></b><font size=2>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)</font><br><font SIZE=2>OF THE SECURITIES EXCHANGE ACT OF 1934</font><br><b><font size=2>For the fiscal year ended September 30, 2003</font></b></p>
<p style=' margin-bottom:0pt;text-align:center; margin-top:6pt;'><font size=2>Commission File Number 0-24248</font></p>
<p style='margin-top:12pt;margin-bottom:0pt;'>
<p style=' margin-bottom:0pt;text-align:center; margin-top:6pt;'><b><font SIZE=5>AMERICAN TECHNOLOGY CORPORATION</font></b></p>
<p style=' margin-bottom:0pt;text-align:center; margin-top:0pt;'><font size=2>(Exact name of registrant as specified in its charter)</font></p>
&nbsp;
<table width="100%" cellspacing=0 cellpadding=0><tr><td width="50">&nbsp;</td><td align=center valign=top width="280">
  <u><b><font size=2>Delaware</font></b></u><br>
<font size=2>(State or other jurisdiction of incorporation or organization)</font><br></td>
<td align=center width="280">&nbsp;</td><td align=center valign=top width="280">
  <u><b><font size=2>87-0361799</font></b></u><br>
<font size=2>(I.R.S. Employer Identification Number)</font></td><td width="50">&nbsp;</td></tr></table><br>
<table width="671" cellspacing=0 cellpadding=0><tr><td width="35">&nbsp;</td>
  <td align=center valign=top width="327"><b><font size=2><u>13114 Evening Creek Drive South, San Diego, California</u></font></b><br>
<font size=2>(Address of principal executive offices)</font><br></td>
<td align=center width="160">&nbsp;</td><td align=center valign=top width="113">
  <u><b><font size=2>92128</font></b><br>
  </u>
<font size=2>(Zip Code)</font></td><td width="36">&nbsp;</td></tr></table><br>
<p style=' margin-bottom:0pt;text-align:center; margin-top:4pt;'><u><b><font size=2>(858) 679-2114</font></b></u><br><font size=2>(Registrant&#146;s telephone number, including area code)</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><b><font size=2>Securities registered pursuant to Section 12(b) of the Act: </font></b><font SIZE=2>NONE</font><br><b><font size=2>Securities registered pursuant to Section 12(g) of the Act: </font></b></p>
<p style=' margin-bottom:0pt;text-align:center; margin-top:6pt;'><u><b><font size=2>Common Stock, $.00001 par value</font></b></u><br><font size=2>(Title of Class)</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding in 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes <font face=Wingdings>x</font> No <font face=Wingdings>o</font></font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant&#146;s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. <font face=Wingdings>o</font> </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act) Yes <font face=Wingdings>o</font> NO <font face=Wingdings>x</font></font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked prices of such common equity, as of the last business day of the registrant&#146;s most recently completed second fiscal quarter.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant (based on the closing price as reported on the NASDAQ SmallCap Market on March 31, 2003) was $41,118,484.*</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>The number of shares of Common Stock, $.00001 par value, outstanding on December 23, 2003, was 19,439,157.</font></p>
<p style=' margin-bottom:0pt;text-align:center; margin-top:6pt;'><b><font SIZE=2>DOCUMENTS INCORPORATED BY REFERENCE</font></b></p>
<p style=' margin-bottom:0pt; margin-top:5pt;'><font size=2>Portions of the registrants Definitive Proxy Statement to be filed with the Commission pursuant to Regulation 14A in connection with the registrants 2004 Annual Meeting of Stockholders, to be filed subsequent to the date hereof, are incorporated by reference into Part III of this Report. Such Definitive Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after the conclusion of the registrants fiscal year ended September 30, 2003.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>* Excludes the Common Stock held by executive officers, directors and stockholders whose ownership exceeds 5% of the Common Stock outstanding at March 31, 2003. This calculation does not reflect a determination that such persons are affiliates for any other purpose.</font></p>
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<p style=' margin-bottom:0pt;text-align:center; margin-top:16pt;'><b><font SIZE=2>
<a name="TABLE OF CONTENTS">TABLE OF CONTENTS</a></font></b></p>
<p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table width="674" border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; ' height="656"> <tr >
<td width="56" valign=bottom height="12" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top height="12" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=bottom width="583" height="12" > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="27" valign=bottom height="12" > <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><u><b><font size=1>Page</font></b></u><b><u></u></b></p> </td> </tr> <tr >
<td width="56" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="583" height="15" > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt; text-align:center;text-indent:-8.65pt;'><b><font SIZE=2>
<a href="#PART I">PART I</a></font></b></p> </td>
<td width="27" valign=bottom height="15" > <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="56" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:12' width="583"> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="27" valign=bottom style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="56" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font SIZE=2>
<a href="#Item 1. Business">ITEM 1.</a></font></p> </td>
<td width="8" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="583" height="15" > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>
<a href="#Item 1. Business">Business</a></font></p> </td>
<td width="27" valign=bottom height="15" > <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'>
<font size="2">1&nbsp;</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="56" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:12' width="583"> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="27" valign=bottom style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="56" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font SIZE=2>
<a href="#Item 2. Properties.">ITEM 2.</a></font></p> </td>
<td width="8" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="583" height="15" > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>
<a href="#Item 2. Properties.">Properties</a></font></p> </td>
<td width="27" valign=bottom height="15" >
<p style="text-align: right; margin-top: 0in; margin-bottom: 0pt">
<font size="2">23</font></td> </tr> <tr  style='height:.05in'>
<td width="56" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:12' width="583"> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="27" valign=bottom style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="56" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font SIZE=2>
<a href="#Item 3. Legal Proceedings.">ITEM 3.</a></font></p> </td>
<td width="8" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="583" height="15" > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>
<a href="#Item 3. Legal Proceedings.">Legal Proceedings</a></font></p> </td>
<td width="27" valign=bottom height="15" >
<p style="text-align: right; margin-top: 0in; margin-bottom: 0pt">
<font size="2">24</font></td> </tr> <tr  style='height:.05in'>
<td width="56" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:12' width="583"> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="27" valign=bottom style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="56" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font SIZE=2>
<a href="#Item 4. Submission of Matters to a Vote of Security Holders.">ITEM 4.</a></font></p> </td>
<td width="8" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="583" height="15" > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>
<a href="#Item 4. Submission of Matters to a Vote of Security Holders.">Submission of Matters to a Vote of Security Holders</a></font></p> </td>
<td width="27" valign=bottom height="15" >
<p style="text-align: right; margin-top: 0in; margin-bottom: 0pt">
<font size="2">25</font></td> </tr> <tr >
<td width="56" valign=top height="12" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top height="12" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="583" height="12" > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="27" valign=bottom height="12" > <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="56" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="583" height="15" > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt; text-align:center;text-indent:-8.65pt;'><b><font SIZE=2>
<a href="#PART II">PART II</a></font></b></p> </td>
<td width="27" valign=bottom height="15" > <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="56" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:12' width="583"> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="27" valign=bottom style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="56" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font SIZE=2>
<a href="#Item 5. Market for Registrant&#146;s Common Equity and Related Shareholder Matters.">ITEM 5.</a></font></p> </td>
<td width="8" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="583" height="15" > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>
<a href="#Item 5. Market for Registrant&#146;s Common Equity and Related Shareholder Matters.">Market for Registrant&#146;s Common Equity and Related Stockholder Matters</a></font></p> </td>
<td width="27" valign=bottom height="15" >
<p style="text-align: right; margin-top: 0in; margin-bottom: 0pt">
<font size="2">25</font></td> </tr> <tr  style='height:.05in'>
<td width="56" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:12' width="583"> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="27" valign=bottom style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="56" valign=top height="11" > <p style='margin-bottom:0pt;margin-top:0in;'><font SIZE=2>
<a href="#Item 6. Selected Financial Data">ITEM 6.</a></font></p> </td>
<td width="8" valign=top height="11" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="583" height="11" > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>
<a href="#Item 6. Selected Financial Data">Selected Financial Data</a></font></p> </td>
<td width="27" valign=bottom height="11" >
<p style="text-align: right; margin-top: 0in; margin-bottom: 0pt">
<font size="2">27</font></td> </tr> <tr  style='height:.05in'>
<td width="56" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>
&nbsp;</font></p> </td>
<td width="8" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>
&nbsp;</font></p> </td>
<td valign=top style=' height:12' width="583"> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>
&nbsp;</font></p> </td>
<td width="27" valign=bottom style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>
&nbsp;</font></p> </td> </tr> <tr >
<td width="56" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font SIZE=2>
<a href="#Item 7. Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations.">
ITEM 7.</a></font></p> </td>
<td width="8" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>
&nbsp;</font></p> </td>
<td valign=top width="583" height="15" > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>
<a href="#Item 7. Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations.">
Management&#146;s Discussion and Analysis of Financial Condition and Results of
Operations</a></font></p> </td>
<td width="27" valign=bottom height="15" >
<p style="text-align: right; margin-top: 0in; margin-bottom: 0pt">
<font size="2">27</font></td> </tr> <tr  style='height:.05in'>
<td width="56" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:12' width="583"> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="27" valign=bottom style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="56" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font SIZE=2>
<a href="#Item 7A. Quantitative and Qualitative Disclosures About Market Risk">ITEM 7A.</a></font></p> </td>
<td width="8" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="583" height="15" > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>
<a href="#Item 7A. Quantitative and Qualitative Disclosures About Market Risk">Quantitative and Qualitative Disclosures About Market Risk</a></font></p> </td>
<td width="27" valign=bottom height="15" >
<p style="text-align: right; margin-top: 0in; margin-bottom: 0pt">
<font size="2">33</font></td> </tr> <tr  style='height:.05in'>
<td width="56" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:12' width="583"> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="27" valign=bottom style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="56" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font SIZE=2>
<a href="#Item 8. Financial Statements and Supplementary Data">ITEM 8.</a></font></p> </td>
<td width="8" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="583" height="15" > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>
<a href="#Item 8. Financial Statements and Supplementary Data">Financial Statements and Supplementary Data</a></font></p> </td>
<td width="27" valign=bottom height="15" >
<p style="text-align: right; margin-top: 0in; margin-bottom: 0pt">
<font size="2">33</font></td> </tr> <tr  style='height:.05in'>
<td width="56" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:12' width="583"> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="27" valign=bottom style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="56" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font SIZE=2>
<a href="#Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure">ITEM 9.</a></font></p> </td>
<td width="8" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="583" height="15" > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>
<a href="#Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure">Changes in and Disagreement with Accountants on Accounting and Financial Disclosure</a></font></p> </td>
<td width="27" valign=bottom height="15" >
<p style="text-align: right; margin-top: 0in; margin-bottom: 0pt">
<font size="2">33</font></td> </tr> <tr  style='height:.05in'>
<td width="56" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:12' width="583"> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="27" valign=bottom style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="56" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font SIZE=2>
<a href="#Item 9A. Controls and Procedures">ITEM 9A.</a></font></p> </td>
<td width="8" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="583" height="15" > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>
<a href="#Item 9A. Controls and Procedures">Controls and Procedures</a></font></p> </td>
<td width="27" valign=bottom height="15" >
<p style="text-align: right; margin-top: 0in; margin-bottom: 0pt">
<font size="2">33</font></td> </tr> <tr >
<td width="56" valign=top height="12" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top height="12" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="583" height="12" > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="27" valign=bottom height="12" > <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="56" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="583" height="15" > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt; text-align:center;text-indent:-8.65pt;'><b><font SIZE=2>
<a href="#PART III">PART III</a></font></b></p> </td>
<td width="27" valign=bottom height="15" > <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="56" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:12' width="583"> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="27" valign=bottom style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="56" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font SIZE=2>
<a href="#Item 10. Directors and Executive Officers of the Registrant">ITEM 10.</a></font></p> </td>
<td width="8" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="583" height="15" > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>
<a href="#Item 10. Directors and Executive Officers of the Registrant">Directors and Executive Officers of the Registrant</a></font></p> </td>
<td width="27" valign=bottom height="15" >
<p style="text-align: right; margin-top: 0in; margin-bottom: 0pt">
<font size="2">34</font></td> </tr> <tr  style='height:.05in'>
<td width="56" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:12' width="583"> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="27" valign=bottom style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="56" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font SIZE=2>
<a href="#Item 11. Executive Compensation">ITEM 11.</a></font></p> </td>
<td width="8" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="583" height="15" > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>
<a href="#Item 11. Executive Compensation">Executive Compensation</a></font></p> </td>
<td width="27" valign=bottom height="15" >
<p style="text-align: right; margin-top: 0in; margin-bottom: 0pt">
<font size="2">34</font></td> </tr> <tr  style='height:.05in'>
<td width="56" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:12' width="583"> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="27" valign=bottom style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="56" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font SIZE=2>
<a href="#Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters">ITEM 12.</a></font></p> </td>
<td width="8" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="583" height="15" > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>
<a href="#Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters">Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters</a></font></p> </td>
<td width="27" valign=bottom height="15" >
<p style="text-align: right; margin-top: 0in; margin-bottom: 0pt">
<font size="2">34</font></td> </tr> <tr  style='height:.05in'>
<td width="56" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:12' width="583"> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="27" valign=bottom style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="56" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font SIZE=2>
<a href="#Item 13. Certain Relationships and Related Transactions">ITEM 13.</a></font></p> </td>
<td width="8" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="583" height="15" > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>
<a href="#Item 13. Certain Relationships and Related Transactions">Certain Relationships and Related Transactions</a></font></p> </td>
<td width="27" valign=bottom height="15" >
<p style="text-align: right; margin-top: 0in; margin-bottom: 0pt">
<font size="2">34</font></td> </tr> <tr  style='height:.05in'>
<td width="56" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:12' width="583"> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="27" valign=bottom style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="56" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font SIZE=2>
<a href="#Item 14. Principal Accounting Fees and Services">ITEM 14.</a></font></p> </td>
<td width="8" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="583" height="15" > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>
<a href="#Item 14. Principal Accounting Fees and Services">Principal Accounting Fees and Services</a></font></p> </td>
<td width="27" valign=bottom height="15" >
<p style="text-align: right; margin-top: 0in; margin-bottom: 0pt">
<font size="2">35</font></td> </tr> <tr >
<td width="56" valign=top height="12" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top height="12" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="583" height="12" > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="27" valign=bottom height="12" > <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="56" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="583" height="15" > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt; text-align:center;text-indent:-8.65pt;'><b><font SIZE=2>
<a href="#PART IV">PART IV</a></font></b></p> </td>
<td width="27" valign=bottom height="15" > <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="56" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:12' width="583"> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="27" valign=bottom style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="56" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font SIZE=2>
<a href="#Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K">ITEM 15.</a></font></p> </td>
<td width="8" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="583" height="15" > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>
<a href="#Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K">Exhibits, Financial Statement Schedules and Reports on Form 8-K</a></font></p> </td>
<td width="27" valign=bottom height="15" >
<p style="text-align: right; margin-top: 0in; margin-bottom: 0pt">
<font size="2">35</font></td> </tr> <tr  style='height:.05in'>
<td width="56" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:12' width="583"> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="27" valign=bottom style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="56" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="583" height="15" > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>
<a href="#SIGNATURES">Signatures</a></font></p> </td>
<td width="27" valign=bottom height="15" >
<p style="text-align: right; margin-top: 0in; margin-bottom: 0pt">
<font size="2">39</font></td> </tr> <tr  style='height:.05in'>
<td width="56" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:12' width="583"> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="27" valign=bottom style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="56" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="583" height="15" > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>
<a href="#Financial Statements">Financial Statements and Financial Statement Schedules</a></font></p> </td>
<td width="27" valign=bottom height="15" >
<p style="text-align: right; margin-top: 0in; margin-bottom: 0pt">
<font size="2">F-1</font></td> </tr> <tr  style='height:.05in'>
<td width="56" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:12' width="583"> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="27" valign=bottom style=' height:12'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="56" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top height="15" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="583" height="15" > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>
<a href="#Exhibit Index">Exhibit Index</a></font></p> </td>
<td width="27" valign=bottom height="15" >
<p style="text-align: right; margin-top: 0in; margin-bottom: 0pt">
<font size="2">35</font></td> </tr> <tr >
<td width="56" valign=top height="12" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top height="12" > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="583" height="12" > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="27" valign=bottom height="12" > <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr> </table>
<br>
<HR noshade align=center width="100%" size=2><p style='page-break-before:always'>
<a href="#TABLE OF CONTENTS"><font size="1">TABLE OF CONTENTS</font></a></p><PAGE>
<p style=' margin-bottom:0pt;text-align:center; margin-top:0pt;'><b>
<a name="PART I">PART I</a></b></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b>Forward Looking Statements</b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><i><font size=2>This Report contains certain statements of a forward-looking nature relating to future events or the future performance of the Company. Words such as &#147;expects,&#148; &#147;anticipates,&#148; &#147;intends,&#148; &#147;plans,&#148; &#147;believes,&#148; &#147;seeks,&#148; &#147;estimates&#148; and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the only means of identifying forward-looking statements. Prospective investors are cautioned that such statements are only predictions and that actual events or results may differ materially. In evaluating such statements, prospective investors should specifically consider various factors identified in this Report, including the matters set forth below under the caption &#147;Risk Factors,&#148; which could cause actual results to differ materially from those indicated by such forward-looking statements.</font></i></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><a name="Item 1. Business">Item 1. Business</a></b></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Overview</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>American Technology Corporation is an innovator of proprietary sound reproduction technologies and products. Our HyperSonic Sound (HSS) technology is a new method of sound reproduction that creates sound &#147;in the air.&#148; Sound is generated along an air column using ultrasonic frequencies, those above the normal range of hearing. The HSS sound beam is highly directional and maintains sound volume over longer distances than traditional loudspeakers. We believe HyperSonic Sound&#146;s unique features are useful in new sound applications. We have 19 issued and 19 pending U.S. patents in the field of parametric or non-linear acoustics. We believe we are the leader in developing and commercializing parametric loudspeakers.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We have made strategic investments to develop additional sound reproduction technologies.</font></p>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Our Long Range Acoustic Device (LRAD) technology produces variable intensity acoustical sound intended for use in long-range delivery of directional sound information, effectively a supercharged megaphone. LRAD products are used as directed long-range hailing and warning systems. </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Our NeoPlanar technology is a thin film magnetic speaker that produces sound of high quality, low distortion and high volume. NeoPlanar applications include high-end sound systems and public address. </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Our PureBass extended range woofer employs unique cabinet construction, novel vent configurations and multiple acoustic filters to minimize distortion and provide high output. It provides a high frequency interface with our NeoPlanar panels and other upper range satellite speaker systems.</font></td></tr></table>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>In recent years our focus has been on developing our sound technologies. The strength of our organization has been a creative advanced development team innovating new sound technology targeted at high-growth markets. In order to capitalize on our technology, achieve success in the future and meet our customers&#146; needs we have begun to make significant changes in our organization, management processes, and business relationships.</font></p>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Organization:</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=8% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Since the beginning of fiscal 2003, 70% of our senior management team has changed. We now have a management team with significant experience in successfully bringing products to market.</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=8% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>We have formed separate Engineering and Advanced Development Departments. The Advanced Development Department will continue to foster creative innovation. The Engineering Department will focus on bringing reliable products to market.</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=8% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>We have reorganized the sales and marketing of our products by the end-user markets they serve. We now have a Business Products and Licensing Group and a Government and Force Protection Systems Group. </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Management Process:</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=8% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>We are implementing a phase gate development process. This process provides executive review of each project at key phases within the development cycle. The goal is to ensure development of products which meet our cost, reliability and business goals.</font></td></tr></table>

<br><p style='margin-bottom:0pt;text-align:center'><font size=2>1</font></p>
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<a href="#TABLE OF CONTENTS"><font size="1">TABLE OF CONTENTS</font></a></p>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=8% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>We have instituted a rigorous engineering verification, design verification and product life testing process. The purpose of this process is to ensure that our products are reliable and meet customer requirements.</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=3.99% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:4pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:4pt;'><font size=2>Business Relationships:</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=9% ></td><td width=3% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:4pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:4pt;'><font size=2>Our strategy is focused on establishing relationships with established national or global partners for sales, manufacturing and distribution to accelerate the worldwide adoption of our products.</font></td></tr><tr><td width=9% >&nbsp;</td><td width=3% nowrap valign="top"><font size=2><b>&#149;</b></font></td><td valign="top">
  <font size="2">Relationships are being chosen and structured carefully for
  complimentary fit with our strategy and achievement of desired objectives.</font></td></tr></table>
<p style=' margin-bottom:0pt; margin-top:4pt;'><font size=2>Our Business Products and Licensing Group (Business Group) licenses and markets HSS, NeoPlanar and Purebass speakers to companies which employ audio in consumer, commercial and professional applications. These companies include traditional OEMs (original equipment manufacturers)  providing sound systems for home, vehicle, computer and commercial applications. Our Business Group also targets organizations engaged in digital signage, point-of-purchase advertising, entertainment and messaging. We believe that HSS with its ability to focus the message and reduce sound clutter of multiple systems is an ideal solution for these companies.</font></p>
<p style=' margin-bottom:0pt; margin-top:4pt;'><font size=2>Our Government and Force Protection Systems Group (Government Group) markets LRAD, HSS and NeoPlanar products to government and military customers and to the expanding force protection market. We also engineer custom sound solutions for these customers. Based on initial market response for long range hailing and warning, emergency response, and engineered acoustic solutions, we expect significant revenue growth for this division in fiscal 2004. </font></p>
<p style=' margin-bottom:0pt; margin-top:4pt;'><font size=2>We believe there is significant growth opportunity for our technologies and products in new sound applications not currently served by conventional sound devices and as an alternative to conventional loudspeakers. We have only recently begun manufacturing and marketing products based on our technologies. During fiscal 2003 we incurred significant costs and encountered manufacturing
and distribution difficulties during the initial startup of HSS production and sales. We are improving manufacturability&nbsp;
and distribution of HSS products, and we expect to launch a new generation of HSS systems in fiscal 2004.</font></p>
<p style=' margin-bottom:0pt; margin-top:4pt;'><font size=2>Our shares of common stock trade through the NASDAQ SmallCap Market under the symbol &#147;ATCO.&#148;  Our address is 13114 Evening Creek Drive South, San Diego, California, and our telephone number is 858-679-2114. Our Internet site is located at www.atcsd.com. We make available through our website free of charge all of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we file them electronically with, or furnish them to the SEC. The information found on our Web site is not part of this annual report. </font></p>
<p style=' margin-bottom:0pt; margin-top:6pt;'><b><font size=2>Our Technology and Products</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><u><font size=2>HyperSonic Sound</font></u></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We believe we have pioneered a new paradigm in sound production based on well-known principles of physics. The common speaker types in use today such as dynamic, electrostatic, ribbon and other transducer-based design, are direct radiating &#150; fundamentally a piston action directly pumping air molecules into motion to create audible sound waves we hear. Parametric or nonlinear acoustics use changing pressures in air to produce sound indirectly. We believe we are the first company to employ the &#147;non-linearity&#148; of air into a commercial sound product. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>HyperSonic Sound employs ultrasonic frequencies to carry content (e.g. music, voice) into the air. Proprietary ultrasonic emitters (transducers which convert electrical energy to high frequency acoustical energy) produce these ultrasonic frequencies beyond the range of hearing. We have developed the ability to use such devices (in lieu of loudspeakers) to emit a custom-generated ultrasonic wave with the proper difference frequency characteristics to produce audible sound within and throughout an invisible beam. Sound does not appear on the surface of the ultrasonic emitter (a significant departure from a direct radiating loudspeaker). If the beam is directed towards a wall, the sound first emanates from the surface of the wall, and if the beam is directed to a person, the sound emanates at the person. This directionality allows sound to be manipulated in space or diffused from a surface in a wide variety of ways to produce
desired effects. The sound also does not dissipate at the same rate over distance as it does with traditional speakers. This unique feature provides greater sound volume at selected distant points with less energy than traditional speakers, creating the ability to communicate directed sound at distances up to hundreds of feet.</font></p>

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<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>With the rapid growth of alternative advertising such as digital signage, point-of-purchase and in-store TV networks, there is a trend towards sound clutter and even pollution. In-store display advertising tend to irritate customers if too intrusive and annoy workers due to the repetition. We have tested our sound with plasma displays to achieve focused controlled sound such that only those customers interested in the promotion are tuned in and nearby clerks do not hear the message. We believe this ability to locate sound will be a driving feature of HSS systems. We believe our HSS technology offers a number of advantages:</font></p>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>The ability to create an invisible beam to place sound
  only where you want it</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Elimination of the need for a speaker enclosure</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Reduction of the effect of room acoustics on sound quality</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Ability to manipulate or selectively position or diffuse the source of sound</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Ability to deliver a beam of sound over longer distances than conventional speakers</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Ability to penetrate other competing sounds</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Elimination of feedback from live microphones</font></td></tr></table>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>The ability to focus sound like a light beam offers a number of new sound applications. Examples of some of the directed sound applications being developed by us and prospective OEMs include:</font></p>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Plasma screens for focused in-store advertising or promotion</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Home theater  to beam selected channels of audio to desired points within the listening environment</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Laser megaphone to &#147;beam&#148; a sound to a single point hundreds of feet away</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Drive-thru ordering communication to limit &#147;noise pollution&#148; to the surrounding environment</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Tradeshow exhibits to directly communicate to customers at a kiosk or display</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Individual audio stories in front of exhibits or points of interest</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Focused paging systems</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Pin-point audio conferencing</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Focused noise cancellation</font></td></tr></table>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We expect additional HSS applications to become evident, as our products become more widely known. We believe HSS will ultimately have application in much broader consumer, home, vehicle, commercial and industrial applications.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We are currently producing in low volume HSS sound reproduction systems consisting of custom electronics and our proprietary emitters. The electronics package is capable of taking a variety of traditional sound input sources (microphone, tape, compact disc, digital and others) and processing the sound for playback through our thin HSS emitters. We have been and in fiscal 2004 expect to continue to be limited in our ability to produce greater quantities of HSS systems due to lead times for component parts, manufacturing setup time for higher capacity and plans to change models.</font></p>

<br><p style='margin-bottom:0pt;text-align:center'><font size=2>3</font></p>
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<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>The following table summarizes HSS product evolution and product plans for fiscal 2004:</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table width="688" border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; '> <tr >
<td width="77" valign=bottom >
<div style="border-bottom-style: solid; border-bottom-width: 1">
  <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b>
  <font size=2>Product</font></b></p>
</div>
</td>
<td width="5" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'>
<font size=2>&nbsp;</font></p> </td>
<td width="75" valign=bottom >
<div style="border-bottom-style: solid; border-bottom-width: 1">
  <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b>
  <font size=2>Introduction</font></b><font size="2"><br> </font> <b>
  <font size=2>Date</font></b></p>
</div>
</td>
<td width="13" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'>
<font size=2>&nbsp;</font></p> </td>
<td valign=bottom width="203" >
<div style="border-bottom-style: solid; border-bottom-width: 1">
  <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;' ><b>
  <font size=2>Description</font></b></p>
</div>
</td>
<td width="10" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'>
<font size=2>&nbsp;</font></p> </td>
<td valign=bottom width="296" >
<div style="border-bottom-style: solid; border-bottom-width: 1">
  <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;' ><b>
  <font size=2>Key Features</font></b></p>
</div>
</td>
<td width="9" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="77" valign=top > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-align:center; text-indent:-8.65pt;'><font size=2>Generation I</font></p> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-align:center; text-indent:-8.65pt;'><font SIZE=2>R220A</font></p> </td>
<td width="5" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="75" valign=top > <p style='margin-top:2pt;margin-bottom:0pt;text-align:center;'><font size=2>May 2002</font></p> </td>
<td width="13" valign=top > <p ><font size=1>&nbsp;</font></p> </td>
<td valign=top width="203" > <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;'><font size=2>Four 5 inch by 5 inch emitters in a 11x11x3.5 inch system</font></p> </td>
<td width="10" valign=top > <p ><font size=1>&nbsp;</font></p> </td>
<td valign=top width="296" > <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;'><font size=2>Supports input from various sources such as microphone, tape, compact disc and digital.</font></p> </td>
<td width="9" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="77" valign=top > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-align:center; text-indent:-8.65pt;'><font size=2>Generation II</font></p> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-align:center; text-indent:-8.65pt;'><font SIZE=2>S220A</font></p> </td>
<td width="5" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="75" valign=top > <p style='margin-top:2pt;margin-bottom:0pt;text-align:center;'><font size=2>August 2003</font></p> </td>
<td width="13" valign=top > <p ><font size=1>&nbsp;</font></p> </td>
<td valign=top width="203" > <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;'><font size=2>Same size as Generation I</font></p> </td>
<td width="10" valign=top > <p ><font size=1>&nbsp;</font></p> </td>
<td valign=top width="296" > <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;'><font size=2>Free form emitter design eliminated vacuum space behind the emitter film. Updated electronics improved sound quality.</font></p> </td>
<td width="9" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="77" valign=top > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-align:center; text-indent:-8.65pt;'><font size=2>Generation III</font></p> </td>
<td width="5" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="75" valign=top > <p style='margin-top:2pt;margin-bottom:0pt;text-align:center;'><font size=2>Targeted for Mid-2004</font></p> </td>
<td width="13" valign=top > <p ><font size=1>&nbsp;</font></p> </td>
<td valign=top width="203" > <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;'><font size=2>Small electronics package. One input source can support multiple emitters of various sizes.</font></p> </td>
<td width="10" valign=top > <p ><font size=1>&nbsp;</font></p> </td>
<td valign=top width="296" > <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;'><font size=2>Emitter device separate from sound input for more custom installations. New electronics to add functionality and improve sound quality.</font></p> </td>
<td width="9" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr> </table>
<br>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We continue to develop improved electronics and emitters and expect to introduce new HSS systems in fiscal 2004. We are also working with OEMs interested in custom modifications of HSS products as the solution for specific application needs. We currently have prototype systems employing emitters up to 196 square inches. We seek to continue to improve our electronics processing to minimize distortion, improve output, reduce electronic packaging size and trim production costs.</font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><u><font size=2>Long Range Acoustic Device</font></u></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Our Long Range Acoustic Device (LRAD) technology employs proprietary techniques to produce variable intensity directional acoustical sound intended for use primarily in long-range delivery of directional sound information, effectively a supercharged megaphone. LRAD is employed as a long-range hailing and warning system with minimal distraction to others not in the directed beam. LRAD technology-based devices have been successfully demonstrated and sold to various military, government and commercial parties. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>One version of this technology, High Intensity Directional Acoustics (HIDA), has potential application as a scaleable nonlethal weapon with significantly increased output for specialized military and government applications. HIDA is in the concept state of development. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>LRAD was developed in parallel with the release of Naval Vessel Protection Zone requirements to enforce a 500 yard exclusion zone and 100 yard protection zone around U.S. Navy warships both in the U.S. and foreign ports and restricted waters. LRAD provides the critical long range communication and intense but not harmful warning layer to determine intent by warning away friendlies, classify noncompliants as hostile, and support lethal rules of engagement. LRAD&#146;s features include:</font></p>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Very high source level acoustic transmissions with a series of phase coherent transducers</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Sound pressure levels in excess of 143 dB (decibels) during continuous operation at a distance of 2 meters during continuous operation with instantaneous peaks at 151 dB</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Limits to 120 dB at 2 meters in normal operation, with a battle override key to allow maximum power to achieve longer hailing and warning distances for certain applications and ambient noise conditions</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>A beam center of 16 degrees either side of center line</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Effective hailing distances in excess of 500 yards, warning distances in excess of 750 yards</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Both voice and warning tones for determining intent for multiple applications</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Low power (400 watts) easily powered by <font size=2>12</font><font size=2>/</font><font size=2>24</font> volt invertors</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Allows for input flexibility from networks, individual microphones, and audio output hand held and wearable computers</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Easily transportable or vehicle mounted, 33&#148; diameter x 4&#148; thickness, lightweight at 40 lbs.</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Very powerful, safe when used properly, and highly directional at distance</font></td></tr></table>

<br><font size="2">We also have other customized LRAD applications under
development to meet specific customer requirements each with broad government
and commercial applications.</font><br>
&nbsp;<p style='margin-bottom:0pt;text-align:center'><font size=2>4</font></p>
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<p style=' margin-bottom:0pt; margin-top:12pt;'><u><font size=2>NeoPlanar Speakers</font></u></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Our NeoPlanar technology is a thin film planar magnetic type speaker that uses novel films, magnetic materials and a manufacturing process which we believe provides improved cost/performance benefits. Traditional planar magnetic speakers use materials with limited power handling ability and are generally associated with high distortion. Our NeoPlanar technology provides the ability to build flat and thin speakers with the following distinguishing features:</font></p>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>High power handling </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Low mass</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>High durability </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Superior sound quality </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>High sensitivity </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>High sound pressure levels </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Extended high frequency output compatible with new compact disk standards</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Exceptional clarity over long distances</font></td></tr></table>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Presently we assemble NeoPlanar panels in 3, 8, and 24-inch segments of 3 inch width. Other lengths and widths are manufacturable. Our NeoPlanar Sound Bar product uses panels in an upright column and our NeoPlanar Sound Squares product organizes panels in a square box figuration.
Both products are designed for public address with high intelligibility at very high output levels. NeoPlanar products can be engineered and customized to fit the needs of a particular facility or outdoor application. NeoPlanar speakers have been employed successfully for military and government installations in ships and hangars, and for outdoor public address and emergency response applications.</font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><u><font size=2>PureBass Woofer Technology</font></u></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Our PureBass extended range sub-woofer was designed to complement our NeoPlanar technology. We believe traditional woofer technologies produce distortion with limited frequency range making it difficult to achieve accurate, seamless transition with upper range speakers. PureBass employs unique cabinet construction and vent configurations along with multiple acoustic filters to produce low distortion and improved transition to high-performance speaker systems. While conventional sub-woofers crossover to upper range speakers at approximately 100-110 Hz, our extended range PureBass woofer allows for crossover well over 220 Hz providing improved matching with thin panel speakers.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We believe the following characteristics distinguish PureBass technology:</font></p>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>An acoustic system filters incoming audio and reduces distortion components to produce a clean sound.</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>These acoustic filters reduce cone motion at low frequencies while allowing greater output and power handling for a given size woofer.</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Higher upper range performance eliminates active or passive low range crossover systems associated with traditional woofers.</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Higher transition frequencies reduces interference providing improved integration with upper range high-quality speakers.</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>PureBass technology reduces the size, weight and cost of a comparably performing system.</font></td></tr></table>

<br>
<u><font size=2>Other Proprietary Technologies</font></u><p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We have other sound inventions and technologies in various stages of development including our Stratified Field Technology (SFT)&reg;. SFT is a thin form, non-magnetic speaker offering high quality performance for a variety of applications. The term Stratified Field relates to the multiple layers of materials employed in the design. We have developed a number of distinct Stratified Field designs employing plastic film as the direct radiating element.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Stratified Field is both a departure from and a significant improvement on electrostatic designs. While employing plastic film as the primary radiating sound element, our designs are distinct from traditional electrostatic, planar magnetic or magnetic actuator speaker designs. New materials and methods are employed to overcome some of the limitations of electrostatic, planar magnetic and magnetic actuator speaker designs.</font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Operating Segment Information</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Our company recently organized into two reportable segments by the end-user markets we serve. Our Business Products and Licensing Group (Business Group) licenses and markets HSS, NeoPlanar and Purebass speakers to companies that employ audio in consumer, commercial and professional applications. Our Government and Force Protection Systems Group (Government Group) markets LRAD, NeoPlanar and HSS products to government and military customers and to the expanding force protection market.</font></p>

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<p style=' margin-bottom:0pt; margin-top:12pt;'><a href="#TABLE OF CONTENTS">
<font size="1">TABLE OF CONTENTS</font></a></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Business Group</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Our Business Group licenses and markets HSS, NeoPlanar and Purebass technology and products to companies that employ audio in consumer, commercial, industrial and professional applications. Consumer applications include home theater, consumer electronic, vehicle and computer multimedia sound systems. Commercial and industrial applications include digital signage, public address, point-of-purchase advertising, entertainment and messaging systems. Professional applications include sound systems for theaters, stadiums, production studios and indoor and outdoor entertainment venues.</font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><u><font size=2>HSS Activities and Strategy</font></u></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>In May 2002 we began producing and selling our first HSS sound reproduction systems to customers. Due to difficulties in production of HSS systems and performance issues with an exclusive licensee encountered during fiscal 2003, we delivered limited quantities to customers. Production and deliveries have been sporadic as we worked through manufacturing and material issues and repaired units under warranty. At September 30, 2003 we recorded a warranty reserve of $319,500 primarily for HSS units. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>HSS units have been shipped to a variety of customers worldwide primarily for use in point-of-purchase displays, kiosks, museum displays, trade show booths and for use by law enforcement agencies, television manufacturers, exposition halls, transportation companies, governmental agencies and the military. We believe future HSS products may have application in much broader consumer, home, vehicle, commercial and industrial applications. We are also working with OEMs to support specific product concepts that leverage the narrowcast capability of HSS technology.</font></p>

<PAGE>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>In addition to direct sales of HSS systems to customers, our Business Group has the following HSS marketing relationships: </font></p>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Sony Business Europe has a nonexclusive supply agreement for HSS units in Europe. One application identified and being developed is for plasma screen digital signage to provide directional audio. We have shipped initial HSS systems to Sony Business Europe and our strategy is to develop this distribution channel in fiscal 2004. This agreement is for an initial period of one year ending in May 2004 with pricing, terms and conditions of orders to be specified and agreed in purchase orders. Either party may cancel the agreement on one month written notice.</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>International Robotics, Inc. is a sales representative for HSS products to its customers and potential licensees. International Robotics has exclusive marketing rights to certain designated customers and nonexclusive rights for other customers. Our agreement with International Robotics terminates in June of 2006, unless earlier terminated for cause. The agreement may also be terminated by either party upon six months prior written notice for any verifiable commercially reasonable reason.</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>iPort Media, Inc. markets and distributes audio/visual displays featuring HSS systems to the worldwide optical retail industry on an exclusive basis. iPort&#146;s displays use HSS to narrowcast infomercials interspersed with local news and weather in optical stores including some leased at national retailers. iPort is in the early stage of installing HSS systems and we are working to support a schedule of future installations. Our agreement with iPort requires iPort to purchase HSS products directly from us. iPort must purchase minimum quantities and place products in minimum numbers of locations in order to maintain exclusivity. The agreement with iPort continues through November 2006, and automatically
renews for successive three year terms thereafter. The agreement may be terminated by either party for cause, or by us if iPort does not meet its minimum purchase obligations.</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Pursuant to distribution agreements, CCNP Digital Creations S.A. is our exclusive distributor for HSS products in Greece and W&amp;MEDIA srl is our exclusive distributor for HSS products in Italy. Each company has the exclusive right to sell HSS products under our name or its own name in its respective country. We maintain the right to license HSS technology to other vendors in those countries for use in other vendors&#146; own products. Our agreement with CCNP Digital Creations terminates November 2006, unless earlier terminated for cause. We cannot unreasonably withhold our consent to renewal terms. Our agreement with W&amp;MEDIA is for a renewable term of one year commencing on the first delivery by
W&amp;MEDIA of a commercial HSS product to an end user, unless earlier terminated for cause.</font></td></tr></table>

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<p>

<br><font size=2>Our HSS strategy is to drive use in growing markets that can benefit from directed or narrowcast sound. The following are some key markets: </font>
</p>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><b><font size=2>Digital Signage </font></b><font size=2>- Digital Signage is a generic term used to describe the replacement of static (passive) signs or displays with video screens (CRT, Plasma, LED) which may contain still or motion video images. The image content, normally advertising or informational, can be changed via network control of each individual sign. Directional audio is required to contain the audio program within a defined space, to eliminate objections to the material from local workers, and to lower the overall audio noise level in a confined space. </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><b><font size=2>Museums and Comparable Display Facilities</font></b><font size=2> - Directional audio is required in museums and similar facilities to focus audio information in targeted areas without distracting other patrons. It is also required to allow multiple audio programs to be played within a confined space. </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><b><font size=2>Trade Show and Conventions</font></b><font size=2> - Trades shows and conventions require directional audio to lessen the overall room noise, attract patrons, focus instructional audio to individual displays, and contain audio programs within defined booth spaces. </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><b><font size=2>Kiosks</font></b><font size=2> - Retail point of purchase or information kiosks required directional audio to contain sound within the immediate space of the kiosk and also to maintain some privacy for each individual listener. </font></td></tr></table>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>The success of our HSS strategy will depend on our ability to establish and maintain volume production of quality HSS systems during fiscal 2004.
We have implemented new management processes for quality control (see &quot;Overview&quot;
above) and we intend to use outside contract manufacturers with existing
scalable platforms and quality control procedures (see &quot;Suppliers and
Manufacturing&quot; below) to achieve this goal. We cannot however assure you that we can be successful in these efforts in a timely manner.</font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><u><font size=2>NeoPlanar and Purebass Activities and Strategy</font></u></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We manufacture and sell NeoPlanar speaker panels for installation in entertainment, luxury yacht, high-end home audio and professional audio applications. Our strategy is to seek customers requiring a simple, rugged, thin, low distortion, high-clarity sound solution. We target customers to use NeoPlanar panels for:</font></p>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=8% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Industrial applications such as factories, airports and other large facilities</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=8% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Vehicles</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=8% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Coupling with flat panel displays</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=8% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Multimedia</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=8% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Public address systems</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=8% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>High-end audio</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=8% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Professional venue applications</font></td></tr></table>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>In August 2001, we entered into a non-exclusive license agreement with Harman International Industries to manufacture and use NeoPlanar technology in the OEM automotive market. The term of the agreement is perpetual unless terminated by either party for cause, or terminated by Harman with 30 days advance written notice. Through September 30, 2003 we received $375,000 in license and startup fees pursuant to this agreement, of which $200,000 has been recognized as revenue. We also earned general consulting fees of $60,000 in fiscal 2003. In the first quarter of fiscal 2004 we billed an additional $125,000 in prepaid royalties pursuant to this agreement.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Our PureBass sub-woofer was designed to complement our NeoPlanar technology. We believe it is also competitive to other woofers for home theater and multimedia applications especially to complement flat panel speakers. Our strategy is to sell PureBass woofers to customers and license the technology to OEM manufacturers.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Effective in August 2003 we licensed our PureBass woofer technology along with our Stratified Field technology (SFT), to Horizon Sports Technologies, Inc. (HST) under a royalty-bearing nonexclusive license. HST is licensed to build and sell HST branded products in the Hi-Fi/Home Theater category. The term of the agreement is perpetual unless terminated by either party for cause. We have not to date received any revenues from this relationship.</font></p>
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<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Effective in October 2002, we reduced our marketing emphasis on our portable consumer product line in order to focus financial, personnel and facility resources on our sound technologies.</font></p>

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<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Government Group</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Late in fiscal 2003 we organized our Government Group to design, manufacture and market LRAD, NeoPlanar and HSS products for government, military and the developing force protection and emergency response markets. We are actively expanding relationships with government agencies including the Pentagon, U.S. Navy, U.S. Coast Guard, U.S. Army, U.S. Marine Corps, Joint Non-Lethal Weapons Directorate, plus several major port authorities and police departments. During fiscal 2002 we installed HSS and/or NeoPlanar systems in a Navy nuclear aircraft carrier and in a guided-missile destroyer. Commercial deliveries of LRAD products commenced in May 2003.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>The landscape of the global defense industry continues to evolve as new events, such as those of September&nbsp;11, 2001, demand alternative strategic defense initiatives. The defense requirements of the United States have shifted from defending against Cold War era threats to a focus upon the management of one or more regional conflicts, homeland security and proactive threat identification. As a result of this change, the defense industry is influenced by several key factors that also may impact our Government Group:</font></p>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>New funding is available to implement new technologies to meet modern threats.</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>There is increased focus on force protection and threat identification. </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>As a result of consolidation in the industry, domestic prime contractors are relying on others to provide subsystems and components.</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>The U.S. military is developing lighter, faster defense platforms that are able to react quickly to regional conflict. These highly mobile, rapidly deployable forces are relying on advanced technologies to provide a full awareness of the battlefield, improve communication and evaluate threats.</font></td></tr></table>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>In February 2003 we entered into two licensing and sales agreements with
subsidiaries of General Dynamics Corporation to purchase, market and resell NeoPlanar and HIDA (High Intensity Directional Acoustics) products and components
with exclusive rights for specified applications to certain government customers, including the Department of Defense, Department of Homeland Security and certain Federal, State and local agencies. In September 2003, in response to a strategic refocus on core business, the
agreement with Bath Iron Works
Corporation for NeoPlanar systems was assigned to General Dynamics Armaments and Technical Products,
Inc. (GD-ATP), which now has the responsibility for marketing both HIDA and NeoPlanar to U.S. military and government customers. Our agreements with
GD-ATP require GD-ATP to purchase components for the respective products directly from us. GD-ATP must purchase minimum quantities of products and/or
obtain minimum research and development funding for us in order to maintain exclusivity under each agreement. The agreements with GD-ATP continue through February 2008, and GD-ATP has the option to renew each agreement for an additional five years. Each agreement may be terminated by either party for cause.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;'>&nbsp;</p>
<p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>Our Government Group personnel provide sales and technical support to General Dynamics. Our personnel also market LRAD (Long Range Acoustic Device), NeoPlanar, and HSS systems to customers outside the scope of our agreements with GD-ATP. Our strategy is to position LRAD, NeoPlanar, and HSS as the premium sound solution product suite for force protection, emergency response, and advanced audio systems throughout government and the security industry, first in the U.S. and then internationally. The following are examples of how our products are being used in force protection:</font></p>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font SIZE=2>LRAD:</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=8% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Sold and installed on ships in the 2<sup>nd</sup>, 3<sup>rd</sup>, and 7<sup>th</sup> fleets for operational test and evaluation</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=8% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Sold and delivered units to the Naval Surface Warfare Development Group, for developing concept of operations against the small boat terrorist threat</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=8% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Sold and delivered units to two Navy fleet concentration areas for evaluating use on piers against the small boat threat and for security forces ashore</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=8% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Delivered units to the U.S. Army, U.S. Marine Corps, and U.S. Coast Guard for field testing for crowd control, area denial of personnel, clearing buildings, and waterside force protection</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=8% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Demonstrated to various port authorities for evaluating uses for commercial ports, airports, bridges and tunnels</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=8% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Demonstrated to various police departments evaluating uses for crowd control and SWAT applications</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=8% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Supported customer requirements for uses such as sports arena crowd control and airport bird management</font></td></tr></table>

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<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% >&nbsp;</td><td width=4% nowrap valign="top">&nbsp;</td><td valign="top">&nbsp;</td></tr><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>NeoPlanar:</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=8% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Spported installation in Hangar Bay 2 on the USS Carl Vinson (CVN 70) and helo hangar on the USS Winston S. Churchill (DDG 81)</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=8% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Dlivered NeoPlanar Sound Bars for installation in a new construction Navy aircraft hangar </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=8% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Intalled NeoPlanar Sound Squares at a private academy to establish a campus emergency response capability</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=8% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Etablishing waterfront hailing and building security system projects to demonstrate improved communication intelligibility at long distances over varying levels of ambient noise</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font SIZE=2>HSS:</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=9% ></td><td width=3% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Supported the ongoing evaluation on the bridge of the USS Winston S. Churchill (DDG 81) for improved command and control communications</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=9% ></td><td width=3% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Supported evaluations by government agencies for next generation command center communications</font></td></tr></table>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We believe other military branches, government agencies and allied forces will employ LRAD systems for long range hailing and warning as part of their force protection strategies.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>In October 2003 GD-ATP obtained a contract awarded by the Naval Surface Warfare Center Crane. As a subcontractor for approximately $240,000, we expect to deliver by late December 2003 modified LRADs to support the pan/tilt and remote operation of the Aircraft Carrier Situational Awareness System (ACSAS) and Integrated Radar Optical Sighting &amp; Surveillance System (IROS3). ACSAS and IROS3 are the U.S. Navy&#146;s high profile shipboard force protections systems, expected to be installed on all aircraft carriers and surface combatants to protect against small boat threats in port, restricted waters and littoral zones. LRAD is designed to add capability to the integrated optics, command and control, and lethal weapon suite by providing a simple, repeatable and reliable way to determine intent through long range hailing and warning.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>LRAD provides our customers with a breakthrough technology to clearly communicate at ranges in excess of 500 yards with a warning tone in the same device that can change behavior. It was originally conceived to provide a new tool in preventing such incidents as the USS Cole attack. It is demonstrating its value for stand off communications for USN and USCG vessel boarding, crowd control, check point operations, and area denial of personnel. Its applications for shipboard and shore side waterside protection and land mobile vehicles is under test and evaluation by a range of military services, the agencies of the Department of Homeland Security, other government agencies, port authorities, and federal and local law enforcement. Airborne applications are also under review.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>NeoPlanar technology provides a next generation communications capability for loud and clear outdoor and indoor public address and emergency response communication for military, government and commercial facilities and areas. Because of its unique capability to increase intelligibility over even high ambient noise plus its robust survivability in most operational environments, NeoPlanar products have a niche for multiple military, government, and force protection applications. Indoors, particularly in large spaces such as aircraft hangars, NeoPlanar provides a high level of clarity due to engineered reduction of multi-path and distortion. For outdoor applications, NeoPlanar extends effective range of clear high fidelity-quality communication to hundreds of yards even over high ambient noise. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We are in the early stages of developing the broad reaching applications of this technology both in new application and replacement speaker markets. The pairing of Neo Planar and HSS technologies offers a significant degree of flexibility for us to engineer acoustic solutions for customers based on intelligibility requirements, and will increasingly support our mission to shape the future of sound.</font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Suppliers and Manufacturing</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We believe establishing and maintaining quality manufacturing capacity is essential to the performance of our products and the growth of our business.</font></p>

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<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>During fiscal 2003, our manufacturing was spread amongst several internal and external resources. NeoPlanar manufacturing for both commercial and government systems remains located in our Carson City facility. LRAD and HSS manufacturing resources are located in our San Diego facility. During fiscal 2003 we also attempted to manufacture HSS units using a outside contractor. Component and manufacturing startup difficulties required us to re-absorb HSS manufacturing into our San Diego facility.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Going forward, we intend to focus internal resources on our core development and engineering capabilities and engage external partners for other required competencies. We intend to establish manufacturing as an external competency during fiscal 2004 as we embark on volume manufacturing of several product lines. We expect HSS, LRAD and NeoPlanar product lines to ramp production during 2004. Our strategy is to engage established global contract manufacturing partners to meet growing production needs.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We believe contract manufacturing matches our needs for the future. Contract manufacturers are equipped to proportionally scale production operations. We plan to use their staff of manufacturing and tooling engineers to minimize our startup costs. Established contract manufacturers also have existing processes to insure quality and lower costs. We intend to select strategic manufacturing partners that can seamlessly transition our products off shore as warranted for future cost savings. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We are also refining our internal business processes to improve how we design, test and qualify product designs. We are implementing more rigorous manufacturing and quality processes to track production and field failures. Key metrics for line yields, warranty returns, root cause analysis and ongoing reliability testing are being tracked.  </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Suppliers are key members of our production chain and will be selected and managed accordingly. Of particular importance is our HSS piezo-film supplier which provides significant expertise in the fabrication of component material used in our proprietary HSS emitters. We have recently implemented more stringent testing of this crucial material. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Our HSS emitters and NeoPlanar panels employ film as a key part of the product. LRAD systems employ customized emitters. We have identified suppliers for film and key parts but some are on a sole source basis. Although other suppliers are believed to be available, the disruption and cost of changing suppliers could have a material adverse effect on our financial condition and results of operations.</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;'>&nbsp;</p>
<p style=' margin-bottom:0pt; margin-top:0pt;'><b><font size=2>Customers</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>For fiscal year ended September 30, 2003, sales to one customer Bath Iron Works Corporation accounted for 24% of revenues, with no other single customer accounting for more than 10% of revenues. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>For fiscal year ended September 30, 2002, sales to three customers, Bath Iron Works Corporation, Harman, and Vulcan Northwest, Inc., accounted for approximately 19%, 12% and 11% of sales, respectively, with no other single customer accounting for more the 10% of revenues. Bath Iron Works provided research and development funding for our LRAD technology, Harman licensed our NeoPlanar technology, and Vulcan Northwest purchased NeoPlanar products.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>For the fiscal year ended September 30, 2001, sales to two customers, ASI Technology and Vulcan Northwest, Inc., accounted for approximately 23% and 10% of sales, respectively. ASI purchased our jet engine noise cancellation patent and Vulcan Northwest purchased NeoPlanar products. No other single customer accounting for more than 10% of revenues. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Our revenues have relied on major customers in the past. Our goal is to diversify sound technology revenues in future periods but until sufficient revenue volume is achieved, the loss of any customer could have a material adverse effect on our financial condition, results of operations and cash flows.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>As we have only recently commenced product manufacturing and sales, with some sales being for evaluation for possible larger future orders, and because our difficulties in bringing HSS to production have resulted in delays in order fulfillment, we do not consider order backlog to be an important index of future performance at this time. Our order backlog was approximately $300,000 at September 30, 2003. Backlog orders are subject to cancellation or rescheduling by our customers.</font></p>

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<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Warranties</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We generally warrant our products to be free from defects in materials and workmanship for a period up to one year from the date of purchase, depending on the product. The warranty is generally a limited warranty, and in some instances imposes certain shipping costs on the customer. To date we have been providing direct warranty service but in the future may establish warranty service through OEM customers or others. Some of our agreements require OEM customers with certain quantities of product for use as warranty replacements. International market warranties are generally similar to the U.S. market.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Due to performance failures of some of our first generation of HSS systems resulting primarily from a vacuum emitter component, we are voluntarily replacing emitters on approximately 700 Generation I HSS units. At September 30, 2003 we had a warranty reserve of $319,500 primarily for HSS units. Warranty costs on other products have not been material. </font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Competition</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Our technologies and products compete with those of other companies. Many of our present and potential future competitors have, or may have, substantially greater resources to devote to further technological and new product developments. We believe we compete primarily on the originality of our concepts, the uniqueness and quality of our technology and designs, the ease and cost of manufacturing and of implementing our technologies, the ability to meet customer needs to differentiate their products, the strength of our intellectual property and the strength of licensee and contract supply arrangements. We may not however be competitive with the existing or future products, technologies or services of our competitors.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Our HSS and NeoPlanar products are offered by both our Business Group and our Government Group. Although others have attempted to use parametric speaker concepts to produce sound, we do not believe they have progressed to the point of cost-effective and directly competitive commercial products to HSS. Holosonic Research Labs, Inc. produces a parametric speaker called the Audio Spotlight. Sennheiser Electronics has announced a parametric speaker product called the AudioBeam Master. These companies employ electrostatic and piezoelectric emitter devices which we believe are less efficient and more expensive than our proprietary emitters. These parametric speaker competitors or others may however introduce products with features and performance competitive to our products.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We believe our patent portfolio will be a barrier to entrants to penetrate the directed sound market using parametric acoustics. Other companies such as Brown Innovations and others have employed domes and other techniques to try to focus or contain sound for directed sound applications such as point-of-sale. We do not believe these methods are directly competitive to HSS in ease of use, cost and performance. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We also believe our NeoPlanar technology is novel and has distinct market attributes compared to existing and competing flat panel and traditional speaker designs. Other companies that are focusing marketing efforts in the flat panel market segment include, but are not limited to (i) high-end electrostatic flat panel manufacturers such as Martin Logan and others, (ii) NXT Plc and its licensees employing the NXT flat panel technology, which uses a magnetic actuator to produce vibrations over a rigid panel, (iii) NCT Group, Inc. and their Gekko line of flat panel speakers using a comparable actuated panel. We are not aware of companies offering flat panel technology to the government market comparable to our government NeoPlanar Products,
but others may introduce products with features and performance competitive to our government NeoPlanar products. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Our LRAD technology is offered by our Government Group. We are not aware of competitors who have achieved the sound output for both voice and warning tone, high directivity, light weight and other attributes necessary to accomplish the government&#146;s desired specifications for force protection hailing and non-lethal weapon applications. Others may however introduce products with features and performance competitive to our LRAD products.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We believe our PureBass woofer technology offered by our Business Group has distinct cost performance benefits versus competitive woofer technology but it will compete with a large number of woofers offered by competitors. </font></p>

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<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Our sound reproduction methods, especially NeoPlanar and PureBass, also compete with traditional loudspeakers. Many international and specialty manufacturers provide loudspeakers and are both competitors and prospective OEMs or licensees. We also compete with branded loudspeaker manufacturers. In general our competitors have substantially greater financial, technical and marketing resources and have proven technology and products, marketing data, customer relationships and distribution channels. Our technologies may not be competitive in the entrenched loudspeaker market with these or other customers.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>There are also continuing attempts by a large number of competitors to innovate new methods of sound reproduction to overcome limitations of traditional loudspeakers. It is possible that alternate technologies and systems that would be directly competitive with our sound technology have been developed but are unknown to us. Such systems may also currently be in development, and may be developed by others in the future.</font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Seasonality</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Since our sales of sound products is just developing we have not experienced any significant seasonality trends to date.
Seasonality trends may however present in the future. Government business tends
to be seasonal due to the U.S. Government procurement cycle, with the quarter
ending September 30 usually producing relatively higher sales and the quarter
ending December 31 usually producing relatively lower sales. Our Government
Group business is expected to experience this seasonality in the future.</font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Government Regulation and Environmental Matters</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Certain of our electronic products are subject to various regulations and are required to meet the specifications of agencies such as the Federal Communications Commission (the &#147;FCC&#148;). We believe we are in substantial compliance with all current applicable regulations, and that we have all material governmental permits, licenses, qualifications and approvals currently required for our operations.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Our Hypersonic Sound technology is subject to control under the Radiation Control for Health and Safety Act of 1968, and the associated regulations promulgated by the Food and Drug Administration, as an electrical emitter of ultrasonic vibrations. Under the terms of such regulations, we were required to provide an abbreviated report to the FDA describing the technology, which we submitted in August 2001. The FDA may respond to such report and request changes or safeguards to the technology, but it has not done so to date. We will also be required to notify the FDA in writing should an HSS product be found to have a defect relating to safety of use due to the emission of electronic product radiation. We do not believe our HSS technology poses any human health risks. However, it is possible that we, or one of our OEM customers or licensees, could be required to modify the technology, or a product incorporating the technology,
to comply with requirements that may be imposed by the FDA.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Our products are being produced to standard product safety requirements for sale in the United States and to similar requirements for sale in Europe and Canada. We expect to meet the electrical and other regulatory requirements for electronic systems or components we sell throughout the world.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Some of our products, especially LRAD, may be subject to certain export controls by the U.S. government in accordance with various statutory authorities, including the Export Administration Act of 1979, the International Emergency Economic Powers Act, the Trading with the Enemy Act of 1917 and the Arms Export Control Act of 1976. These export control laws and regulations affect the export of products and services to foreign customers, potential customers and business partners, as well as to fellow ATC employees, foreign regulatory bodies and foreign persons generally. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Export jurisdiction over products and services appearing on the United States Munitions List (USML) resides with the U.S. Department of State, and such products and services are subject to the Arms Export Control Act and the International Traffic in Arms Regulations. We do not believe any of our products and services are on the USML. However, there is a possibility that the U.S. Department of State may consider our HIDA technology and related items, technical data and services to be &#147;directed energy weapons,&#148; as contemplated by Category XVIII of the USML. If such a determination is made, we must register with the Office of Defense Trade Controls (DTC) and receive an export license from the DTC prior to the export of HIDA technology and related items, technical data and services.</font></p>


<p align="center"><font size="2" face="Times New Roman">12</font></p>
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<p><a href="#TABLE OF CONTENTS"><font size="1">TABLE OF CONTENTS</font></a></p>


<p style=' margin-bottom:0pt; margin-top:8pt;'><font size="2">Products, technical data and services exported by us and not appearing on the USML are subject to the export jurisdiction of the U.S. Department of Commerce, pursuant to the Export Administration Act and the Export Administration Regulations.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>In general, U.S. Government licenses or other approvals must be obtained before exports of USML items, related technical data and services are made; and may also be required before such items, data and services are re-exported or transferred from one foreign person to another foreign person. There can be no assurance that such licenses or approvals will be granted. Also, licenses or approvals may be granted with limitations, provisos or other requirements imposed by the U.S. Government as a condition of approval, which may affect the scope of permissible activity under the license or approval. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>As a defense contractor or subcontractor, our contract costs may be subject to audit and review by the U.S. Government. Audits and investigations are conducted from time to time to determine if performance and administering of U.S. Government contracts are compliant with applicable contractual requirements, and procurement and other applicable Federal statutes and regulations. Under present U.S. Government procurement regulations, if indicted or adjudged in violation of procurement or other Federal civil laws, a contractor or subcontractor, such as us, could be subject to fines, penalties, repayments or other damages. U.S. Government regulations also provide that certain findings may lead to suspension or debarment from eligibility for awards of new U.S. Government contracts for up to three years. In addition, U.S. Government foreign export privileges could be suspended or revoked. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Although we do not have any regulatory action pending against us, any such action could have a material adverse impact on our business, financial condition, results of operations and cash flows.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We do not believe we are materially affected, nor do we expect to be materially affected, by the costs and effects of compliance with environmental laws.</font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Intellectual Property Rights and Proprietary Information</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We operate in an industry where innovations, investment in new ideas and protection of resulting intellectual property rights are important to success. We rely on a variety of intellectual property protections for our products and technologies, including patent, copyright, trademark and trade secret laws, and contractual obligations, and we pursue a policy of vigorously enforcing such rights.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We have a substantial base of intellectual property assets. We own 31 U.S. patents and have approximately 31 U.S. patents (and additional foreign applications) pending on our sound technologies. Our issued patents expire between 2006 and 2023. We are preparing and intend to file other sound technology patent applications. We own one U.S. patent on a portable consumer product and two U.S. patents on other technology. We purchased and own one patent on transducer technology primarily targeted for government applications. We target our patent coverage to provide protection in the major manufacturing and commercial centers of the world.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>In addition to such factors as innovation, technological expertise and experienced personnel, we believe that a strong patent position is important to compete effectively in the sound reproduction industry. We believe this is especially important to protect our leadership position in parametric acoustics (HSS). The following table lists some of our key HSS patents and patent applications and the inventions they cover:</font></p>

<br>

<p align="center"><font size="2" face="Times New Roman">13</font></p>
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<table width="671" border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; '> <tr >
<td width="326" valign=bottom >
<div style="border-bottom-style: solid; border-bottom-width: 1">
  <p style='margin-top:2pt;margin-bottom:0pt;'><b><font size=2>Key Patent Title</font></b></p>
</div>
</td>
<td width="15" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'>
<font size=2>&nbsp;</font></p> </td>
<td valign=bottom width="322" >
<div style="border-bottom-style: solid; border-bottom-width: 1">
  <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;text-align:justify;'><b>
  <font size=2>Coverage</font></b></p>
</div>
</td>
<td width="8" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="326" valign=top > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=2>Acoustic Heterodyne Device and Method</font></p> </td>
<td width="15" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="322" > <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;'><font size=2>Virtual loudspeaker projection, controlling virtual projection attributes and direction with a computer driver and in ear applications for HSS</font></p> </td>
<td width="8" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="326" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="15" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top width="322" > <p><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="326" valign=top > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=2>Piezoelectric Film Sonic Emitter</font></p> </td>
<td width="15" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="322" > <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;'><font size=2>Piezoelectric film based emitters</font></p> </td>
<td width="8" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="326" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="15" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top width="322" > <p><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="326" valign=top > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=2>Parametric Loudspeaker w/ Electro-Acoustical One stage Diaphragm Transducer</font></p> </td>
<td width="15" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="322" > <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;'><font size=2>All film type transducers for HSS</font></p> </td>
<td width="8" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="326" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="15" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="322" > <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="326" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="15" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top width="322" > <p><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="326" valign=top > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=2>Modulator Processing for a Parametric Loudspeaker</font></p> </td>
<td width="15" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="322" > <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;'><font size=2>Advanced distortion correction </font></p> </td>
<td width="8" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="326" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="15" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top width="322" > <p><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="326" valign=top > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=2>Parametric Loudspeaker with Improved Phase Characteristics</font></p> </td>
<td width="15" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="322" > <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;'><font size=2>Ideal tuning of parametric carriers for maximum efficiency</font></p> </td>
<td width="8" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="326" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="15" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="322" > <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="326" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="15" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top width="322" > <p><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="326" valign=top > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=2>Power Amplification for Parametric Loudspeakers</font></p> </td>
<td width="15" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="322" > <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;'><font size=2>All high efficiency switch-mode power amplifiers for HSS</font></p> </td>
<td width="8" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="326" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="15" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top width="322" > <p><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="326" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=2>Parametric Virtual Speaker and Surround Sound System</font></p> </td>
<td width="15" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="322" > <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;'><font size=2>HSS for virtual surround sound </font></p> </td>
<td width="8" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="326" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="15" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="322" > <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="326" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="15" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top width="322" > <p><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="326" valign=top > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=2>Pre-encoded Signals for Playback though a Parametric Loudspeaker System</font></p> </td>
<td width="15" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="322" > <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;'><font size=2>Pre recorded HSS processing for reduced processing cost and hardware</font></p> </td>
<td width="8" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="326" valign=top > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="15" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="322" > <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="326" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="15" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top width="322" > <p><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="326" valign=top > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=2>Dynamic Carrier System for Parametric Arrays</font></p> </td>
<td width="15" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="322" > <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;'><font size=2>Reduced power consumption and increased efficiency in HSS</font></p> </td>
<td width="8" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=top width="326" > <hr noshade width="100%"  color="gray" size=1> </td>
<td valign=top width="15" > <hr noshade width="100%"  color="gray" size=1> </td>
<td valign=top width="322" > <hr noshade width="100%"  color="gray" size=1> </td>
<td valign=top width="8" > <hr noshade width="100%"  color="gray" size=1> </td> </tr> </table>
<br>
<p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>The following table lists some of our other key sound patents and patent applications and the inventions they cover:</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table width="671" border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; '> <tr >
<td width="324" valign=bottom >
<div style="border-bottom-style: solid; border-bottom-width: 1">
  <p style='margin-top:2pt;margin-bottom:0pt;'><b><font size=2>Key Patent Title</font></b></p>
</div>
</td>
<td width="16" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'>
<font size=2>&nbsp;</font></p> </td>
<td valign=bottom width="323" >
<div style="border-bottom-style: solid; border-bottom-width: 1">
  <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;'><b><font size=2>Coverage</font></b></p>
</div>
</td>
<td width="8" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="324" valign=top > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=2>Single End Planar Magnetic Speaker</font></p> </td>
<td width="16" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td valign=bottom width="323" > <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;'><font size=2>a) Single Ended, Planar Magnetic loudspeaker w/high energy magnets</font></p> </td>
<td width="8" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="324" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="16" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td valign=bottom width="323" > <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;'><font size=2>b) High speed/low cost planar magnetic diaphragm production</font></p> </td>
<td width="8" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="324" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="16" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td valign=bottom width="323" > <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;'><font size=2>c) Specialized PEN film for use in planar magnetic loudspeakers</font></p> </td>
<td width="8" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="324" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="16" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top width="323" > <p><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="324" valign=top > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=2>Acoustically Asymmetric Band-Pass Loudspeaker With Multiple Acoustic Filters</font></p> </td>
<td width="16" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="323" > <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;'><font size=2>a) Low distortion/High Powered Subwoofer</font><br> <font size=2>b) Increased bandwidth subwoofer</font></p> </td>
<td width="8" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="324" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="16" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td valign=bottom width="323" > <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="324" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="16" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top width="323" > <p><font size=1>&nbsp;</font></p> </td>
<td width="8" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="324" valign=top > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=2>Dynamic Power Sharing in a Multi-Channel Sound System</font></p> </td>
<td width="16" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td valign=top width="323" > <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;'><font size=2>Power/cost savings, increased output in surround sound/home theater systems</font></p> </td>
<td width="8" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td> </tr> </table>
<br>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We have an ongoing policy of filing patent applications to seek protection for novel features of our products and technologies. Prior to the filing and granting of patents, our policy is to disclose key features to patent counsel and maintain these features as trade secrets prior to product introduction. We cannot assure you that any additional patents on our products or technology will be granted.</font></p>

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<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We are investing significant management, legal and financial resources toward our technology patents. The electronics industry is characterized by frequent litigation regarding patent and other intellectual property rights. Others, including academic institutions and competitors, hold numerous patents in electronics and sound reproduction. Although we are not aware of any existing patents that would materially inhibit our ability to commercialize our sound technology, others may assert claims in the future. Such claims, with or without merit, may have a material adverse effect on our financial condition or results of operations. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>The validity of our existing patents has not been adjudicated by any court. Competitors may bring legal action to challenge the validity of our existing or future patents or may attempt to circumvent the protection provided by such patents. The failure to obtain patent protection or the loss of patent protection on our existing and future technologies or the circumvention of our patents by competitors could have a material adverse effect on our ability to compete successfully.</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;'>&nbsp;</p>
<p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>We generally take advantage of the Patent Convention Treaty procedures for patent protection in foreign countries. This procedure is more cost efficient, but results in a delay in the application and issuance of foreign patents; however, any resulting foreign patents, if and when issued, enjoy the same priority date as U.S. counterparts.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We also file for trade name and trademark protection when appropriate. We are the owner of federally registered trademarks including HYPERSONIC&reg;, HSS&reg;, SFT&reg;, STRATIFIED FIELD&reg;, PMT&reg;, NEOPLANAR&reg;, PUREBASS&reg; and SHAPING THE FUTURE OF SOUND&reg;. Trade names or trademarks may not be successfully maintained, defended or protected.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Our policy is to enter into nondisclosure agreements with each employee and consultant or third party to whom any of our proprietary information is disclosed. These agreements prohibit the disclosure of confidential information to others, both during and subsequent to employment or the duration of the working relationship. There can be no assurance, however, that these agreements will not be breached, that we will have adequate remedies for any breach or that our trade secrets will not otherwise become known or be independently developed by competitors.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Under a technology license agreement we assumed in connection with our acquisition of the NeoPlanar Technology, we are obligated to pay Bohlender-Graebener Corporation, the former owner of the technology, a royalty for all film purchases for the technology. We were further obligated to pay a minimum royalty to maintain exclusivity, which we elected not to pay in 2002. Bohlender-Graebener Corporation has asserted that the minimum royalty for 2002 is due. We have a non-binding agreement with Bohlender-Graebener Corporation to settle its allegation and to buy out future royalties, which agreement is subject to the completion of definitive documentation. See Part I, Item 3 discussion below under the caption &#147;Legal Proceedings.&#148;</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'>
<font size="2">We are obligated to
pay a $2.50 per unit royalty on one electronic component for our HSS product. We
are also obligated to pay Elwood G. Norris, our Chairman, a 2% royalty on net
sales from certain of our technologies, of which only HSS is a current offering
of our company. The royalty obligation continues until at least March 1, 2007,
and for any longer period during which we sell products or license technologies
subject to any patent assigned to us by Mr. Norris. No royalties were paid under
this agreement in the fiscal years ended September 30, 2003 or 2002, as such
royalties were waived by Mr. Norris. We may owe royalties in future periods
based on actual sales or technology revenues.</font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Research and Development</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>The sound reproduction market is subject to rapid changes in technology and designs with frequent improvements and new product introductions. We believe our future success will depend on our ability to enhance and improve existing technologies and to introduce new technologies on a competitive basis. Accordingly, we have in the past, and we expect in the future, to engage in significant research and development activities. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>For the fiscal years ended September 30, 2003, 2002 and 2001 we spent $2,437,591, $3,537,355 and $3,136,109 respectively, on company-sponsored research and development, and $55,760, $84,708, and $-0- on customer-sponsored research and development. Future levels of research and development expenditures will vary depending on the timing of further new product development and the availability of funds to carry on additional research and development on currently owned technologies or in other areas.</font></p>

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<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Executive Officers</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Our current executive officers of American Technology Corporation and their ages and business experience for the last five years are set forth below.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><i><b><font size=2>Elwood G. Norris,</font></b></i><b><font size=2> </font></b><font size=2>age 65, has been a Director of our company since August 1980. Mr.&nbsp;Norris served as Chief Executive Officer from October 2000 until February 2003. He currently serves as Chairman of the Board, an executive position. He served as President from August 1980 to February 1994. Mr.&nbsp;Norris managed our research and development activities as Chief Technology Officer through December 2000. From 1988 to November 1999 he was a director and Chairman of e.Digital Corporation, a public company engaged in electronic product development, distribution and sales. During that period he also held various other executive officer positions at e.Digital. From August 1989 to October 1999 he served as director and held various executive officer positions with Patriot Scientific Corporation, a public company engaged in the development of microprocessor technology.
He is an inventor with over 44 U.S. patents, primarily in the fields of electrical and acoustical engineering. He is the inventor of our HyperSonic Sound and other technologies.</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;'>&nbsp;</p>
<p style=' margin-bottom:0pt; margin-top:0pt;'><i><b><font size=2>Kalani Jones,</font></b></i><font size=2> age 40, joined our company as Vice President of Operations in September 2003 and later that month assumed the position of Chief Operating Officer. From October 1999 to November 2002 he was Vice President Engineering and Product Operations for Tachyon Inc., a San Diego provider of satellite networking solutions. From 1997 to 1999 he was Senior Director for Program Management at IOMEGA and previously held engineering management positions at General Instrument and TRW. From November 2002 until being recruited by the Company, Mr.&nbsp;Jones was a self-employed entrepreneur developing technology based remote monitoring solutions. Mr.&nbsp;Jones obtained a M.S.E.E. degree in Digital Communications and Digital Signal Processing from USC in 1988 and a B.S.E.E. in Electrical and Computer Engineering from California State Polytechnic University in 1984.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><i><b><font size=2>Carl Gruenler,</font></b></i><font size=2> age 50, was appointed Vice President of Military Operations in June 2003. He manages the Government Group. He assumed additional responsibilities as Interim Chief Financial Officer in November 2003. From May 1998 to June 2003 he served as Smart Wing Program Manager for the Combat Patrol and Reconnaissance Wing as a Captain in the United States Navy. He was responsible for identifying and developing new integrated systems for physical security/access control, waterside force protection and mobile computing. Mr.&nbsp;Gruenler&#146;s prior business experience includes serving as president of Thomas D. Mangelsen, Inc., a national retail, manufacturing and distribution company; chief financial officer of Automated Monitoring and Control International, Inc., a railroad systems technology company; and a project manager/financial analyst at Union Pacific Railroad. He holds an M.B.A.
from the University of Nebraska-Lincoln (1981) and a BS in Business Administration from Oral Roberts University in (1975).</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><i><b><font size=2>Bruce Ehlers, </font></b></i><font size=2>age 45, was appointed Vice President of Engineering in October 2003. From May 1999 to March 2003 Mr.&nbsp;Ehlers was assistant vice president at Copper Mountain Networks where he was responsible for Copper Mountain&#146;s hardware and embedded software development, engineering services and engineering program management. From January 1997 to May 1999 Mr.&nbsp;Ehlers was senior director of Research and Development at Iomega&#146;s Mobile Storage Division. While at Iomega, he lead research and development for Iomega&#146;s new generation of tape and miniature, removable disk drives. He has held previous engineering management positions at General Instrument, Cipher Data Products and TRW. He holds a BSEE (1980) and MSEE (1981) from Purdue University.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><i><b><font size=2>Joseph A. Zerucha,</font></b></i><font size=2> age 40, was appointed as Vice President of Sales and Marketing in December 2003. From December 2002 to December 2003, Mr.&nbsp;Zerucha was President of Liberties Consulting, where he established and trained sales teams and implemented innovative marketing and management strategies for a variety of clients. From April 2001 to November 2002, he was Chief Operating Officer and Treasurer of Tachyon, Inc., a provider of broadband connectivity and Internet services to large enterprises and governmental entities. He served as President for a division of Clear Channel Communications from May 1999 to April 2001 where he was responsible for build-out of a new industry-leading audio distribution platform. From 1995 to May 1999 he was Director of Worldwide Sales and Channel Development for ViaSat, Inc., a maker of satellite communications equipment and software.</font></p>

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<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Employees</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>At December 1, 2003, in addition to our five executive officer employees, we employed 41 full-time persons. Of such employees, 13 are in research and development, 17 in production and materials control, five in general and administrative and six in marketing, sales and licensing. We also lease technical personnel from time to time on an as needed basis and use outside consultants for various services. We have not experienced any work stoppages and are not a party to a collective bargaining agreement and we consider our relations with our employees to be good.</font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Risk Factors</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><i><font size=2>An investment in our company involves a high degree of risk. In addition to the other information included in this Report, you should carefully consider the following risk factors in evaluating an investment in our company. You should consider these matters in conjunction with the other information included or incorporated by reference in this Report.</font></i></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><b><font size=2>We have a history of net losses. We expect to continue to incur net losses and we may not achieve or maintain profitability. </font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We have incurred significant operating losses and anticipate continued losses in fiscal 2004. At September 30, 2003, we had an accumulated deficit of $36,367,057.</font><b><font size=2> </font></b><font size=2>We need to generate additional revenue to be profitable in future periods. Failure to achieve profitability, or maintain profitability if achieved, may cause our stock price to decline.</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;'>&nbsp;</p>
<p style=' margin-bottom:0pt; margin-top:0pt;'><b><font size=2>We are an early stage company introducing new products and technologies. If commercially successful products are not produced in a timely manner, we may be unprofitable or forced to cease operations. </font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Our HSS, NeoPlanar, PureBass and LRAD technologies have only recently been introduced to market and are still being improved. Commercially viable sound technology systems may not be successfully and timely produced by us or by original equipment manufacturers (OEMs) due to the inherent risks of technology development, new product introduction, limitations on financing, manufacturing problems, competition, obsolescence, loss of key technical personnel and other factors. Revenues from our sound technology have been limited to date, and we cannot guarantee significant revenues in the future. The development and introduction of our products has taken longer than anticipated by management and could be subject to additional delays. Customers may not wait for our products and may elect to purchase products from competitors. We have experienced manufacturing quality control problems with some of our initial commercial HSS units, and
we may not be able to resolve future manufacturing problems in a timely and cost effective manner. Products employing our sound technology may not achieve market acceptance. Our various sound projects are high risk in nature, and unanticipated technical obstacles can arise at any time and result in lengthy and costly delays or result in a determination that further exploitation is unfeasible. If we do not successfully exploit our technology, our financial condition and results of operations and business prospects would be adversely affected. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><b><font size=2>Our products hare never been produced in quantity, and we may incur significant and unpredictable warranty costs as these products are mass produced. We have incurred substantial warranty costs related to our first generation HSS systems, which caused a negative gross margin for the fiscal year ended September 30, 2003.</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>None of our products has been mass produced, and certain of our technologies, including HSS and LRAD, are substantially different from proven, mass produced sound transducer designs. We may incur substantial and unpredictable warranty costs from post-production product or component failures. We generally warrant our products to be free from defects in materials and workmanship for a period up to one year from the date of purchase, depending on the product.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Due to performance failures of components in some of our first generation of HSS systems, we are voluntarily replacing emitters on an estimated 700 Generation I HSS units. At September 30, 2003 we had a warranty reserve of $319,500, with $275,000 scheduled for this replacement program. During fiscal 2003 we incurred warranty expense of $313,187, substantially all for HSS units. These warranty costs caused us to have a negative gross margin for fiscal 2003. Future warranty costs could further adversely affect our financial position, results of operations and business prospects.</font></p>

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<p style=' margin-bottom:0pt; margin-top:8pt;'><b><font size=2>We do not have the ability to predict future operating results. Our quarterly and annual revenues will likely be subject to fluctuations caused by many factors, any of which could result in our failure to achieve our revenue expectations. </font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Our historical revenues have included sales of portable consumer products.. The majority of our fiscal 2003 revenues were generated from our sound reproduction technologies, and we expect these to be the source of substantially all of our future revenues. Revenues from our sound reproduction technologies are expected to vary significantly due to a number of factors. Many of these factors are beyond our control. Any one or more of the factors listed below or other factors could cause us to fail to achieve our revenue expectations. These factors include: </font></p>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>our ability to develop and supply sound reproduction components to customers, distributors or OEMs or to license our technologies; </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>market acceptance of and changes in demand for our products or products of our customers; </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>gains or losses of significant customers, distributors or strategic relationships; </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>unpredictable volume and timing of customer orders; </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>the availability, pricing and timeliness of delivery of components for our products and OEM products;</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>fluctuations in the availability of manufacturing capacity or manufacturing yields and related manufacturing costs;</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>the timing of new technological advances, product announcements or introductions by us, by OEMs or licensees and by our competitors; </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>product obsolescence and the management of product transitions and inventory; </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>unpredictable warranty costs associated with new product modes;</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>production delays by customers, distributors, OEMs or by us or our suppliers; </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>seasonal fluctuations in sales; </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>the conditions of other industries, such as military and commercial industries, into which our technologies may be licensed; </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>general consumer electronics industry conditions, including changes in demand and associated effects on inventory and inventory practices; and </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>general economic conditions that could affect the timing of customer orders and capital spending and result in order cancellations or rescheduling.</font></td></tr></table>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Some or all of these factors could adversely affect demand for OEM products incorporating our sound reproduction products or technologies, and therefore adversely affect our future operating results.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Most of our operating expenses are relatively fixed in the short term. We may be unable to rapidly adjust spending to compensate for any unexpected sales or license revenue shortfalls, which could harm our quarterly operating results. We do not have the ability to predict future operating results with any certainty. </font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Our expenses may vary from period to period, which could affect quarterly results and our stock price. </font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>If we incur additional expenses in a quarter in which we do not experience increased revenue, our results of operations would be adversely affected and we may incur larger losses than anticipated for that quarter. Factors that could cause our expenses to fluctuate from period to period include: </font></p>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=8% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>the timing and extent of our research and development efforts; </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=8% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>investments and costs of maintaining or protecting our intellectual property;</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=8% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>the extent of marketing and sales efforts to promote our products and technologies; and </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=8% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>the timing of personnel and consultant hiring. </font></td></tr></table>

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<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Sound reproduction markets are subject to rapid technological change, so our success will depend on our ability to develop and introduce new technologies. </font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Technology and standards in the sound reproduction markets evolve rapidly, making timely and cost-effective product innovation essential to success in the marketplace. The introduction of products with improved technologies or features may render our technologies obsolete and unmarketable. If we cannot develop products in a timely manner in response to industry changes, or if our technologies do not perform well, our business and financial condition will be adversely affected. The life cycles of our technologies are difficult to estimate, particularly those such as HSS and LRAD for which there are no established markets. As a result, our technologies, even if successful, may become obsolete before we recoup our investment. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><b><font size=2>Our HSS technology is subject to government regulation, which could lead to unanticipated expense or litigation. </font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Our HyperSonic Sound technology emits ultrasonic vibrations, and as such is regulated by the Food and Drug Administration. In the event of certain unanticipated defects in an HSS product, a customer or we may be required to comply with FDA requirements to remedy the defect and/or notify consumers of the problem. This could lead to unanticipated expense, and possible product liability litigation against a customer or us. Any regulatory impediment to full commercialization of our HSS technology, or any of our other technologies, could adversely affect our results of operations.</font></p>

<p style=' margin-bottom:0pt; margin-top:8pt;'><b><font size=2>We may face personal injury and other liability claims that harm our reputation and adversely affect our sales and financial condition.</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Some of our products are capable of sufficient acoustic output to cause damage to human hearing or human health if used improperly, such as when the products are used at close ranges or for long periods of exposure. A person injured in connection with the use of our products may bring legal action against us to recover damages on the basis of theories including personal injury, negligent design, dangerous product or inadequate warning. We may also be subject to lawsuits involving allegations of misuse of our products. Our product liability insurance coverage may be insufficient to pay all such claims. Product liability insurance may become too costly for us or may become unavailable for us in the future. We may not have sufficient resources to satisfy any product liability claims not covered by insurance which would materially and adversely affect our financial position. Significant litigation could also result in a diversion
of management&#146;s attention and resources, and negative publicity.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><b><font size=2>We may not be successful in obtaining the necessary licenses required for us to sell some of our products abroad. </font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Licenses for the export of certain of our products may be required from government agencies in accordance with various statutory authorities, including the Export Administration Act of 1979, the International Emergency Economic Powers Act, the Trading with the Enemy Act of 1917 and the Arms Export Control Act of 1976. We may not be able to obtain the necessary licenses in order to conduct business abroad. In the case of certain sales of defense equipment and services to foreign governments, the U.S. Department of State must notify Congress at least 15 to 30 days, depending on the size and location of the sale, prior to authorizing these sales. During that time, Congress may take action to block the proposed sale. Failure to receive required licenses or authorization would hinder our ability to sell some of our products outside the United States.</font></p>

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<p style=' margin-bottom:0pt; margin-top:8pt;'><b><font size=2>Our operations could be harmed by factors including political instability, natural disasters, fluctuations in currency exchange rates and changes in regulations that govern international transactions.</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We expect to sell or products worldwide. The risks inherent in international trade may reduce our international sales and harm our business and the businesses of our customers and our suppliers. These risks include:</font></p>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>changes in tariff regulations;</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>political instability, war, terrorism and other political risks;</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>foreign currency exchange rate fluctuations;</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>establishing and maintaining relationships with local distributors and dealers;</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>lengthy shipping times and accounts receivable payment cycles;</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>import and export licensing requirements;</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>compliance with a variety of foreign laws and regulations, including unexpected changes in taxation and regulatory requirements;</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>greater difficulty in safeguarding intellectual property than in the U.S.; and</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>difficulty in staffing and managing geographically diverse operations.</font></td></tr></table>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>These and other risks may preclude or curtail international sales or increase the relative price of our products compared to those manufactured in other countries, reducing the demand for our products.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><b><font size=2>Many potential competitors who have greater resources and experience than we do may develop products and technologies that make ours obsolete. </font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Technological competition from other and longer established electronic and loudspeaker manufacturers is significant and expected to increase. Most of the companies with which we expect to compete have substantially greater capital resources, research and development staffs, marketing and distribution programs and facilities, and many of them have substantially greater experience in the production and marketing of products. In addition, one or more of our competitors may have developed or may succeed in developing technologies and products that are more effective than any of ours, rendering our technology and products obsolete or noncompetitive. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><b><font size=2>Our business is highly dependent on our level of sales to
General Dynamics Armament and Technical Products, Inc., which has exclusive rights to market
defined applications to various end user customers. The success of that company&#146;s marketing efforts will significantly affect our results of operations in future periods.</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>In February 2003 we entered into two licensing and sales agreements with
subsidiaries of General Dynamics Corporation to purchase, market and resell NeoPlanar and HIDA (High Intensity Directional Acoustics) products and components exclusively for specified applications to certain government customers. In September 2003, the
agreement with Bath Iron Works Corporation for NeoPlanar systems was assigned to General Dynamics Armaments and Technical Products,
Inc.&nbsp; (GD-ATP), which now has the responsibility for marketing both HIDA and NeoPlanar under the contracts. These agreements continue through February 2008, and GD-ATP
has the option to renew each agreement for an additional five years. See Part I,
Item 1 discussion above under the caption &#147;Government Group.&#148;</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Bath Iron Works Corporation has been our largest customer, accounting for approximately 24% of revenues in fiscal 2003 and 19% of revenues in fiscal 2002. Our future sales to GD-ATP may be affected adversely by various factors relating to GD-ATP&#146;s business plans, marketing efforts, allocation of resources, strategic focus, liquidity, results of operation and financial position. As a consequence, our results of operation and financial position will be materially and adversely affected by the reduction, delay or cancellation of GD-ATP orders, or by the failure of GD-ATP to grow sales to its exclusive customers.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><b><font size=2>Commercialization of our sound technologies depends on collaborations with other companies. If we are not able to maintain or find collaborators and strategic alliance relationships in the future, we may not be able to develop our sound technologies and products. </font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>As we do not have the production, distribution, marketing and selling resources to commercialize our products on our own, our strategy is to establish business relationships with leading participants in various segments of the electronics,
government and sound reproduction markets to assist us in producing, distributing, marketing and selling products that include our sound technologies. </font></p>

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<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Our success will therefore depend on our ability to maintain or enter into new strategic arrangements with partners on commercially reasonable terms. If we fail to enter into such strategic arrangements with third parties, our financial condition, results of operations, cash flows and business prospects will be adversely affected. Any future relationships may require us to share control over our development, manufacturing and marketing programs or to relinquish rights to certain versions of our sound and other technologies. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><b><font size=2>We will be dependent on outside manufacturers, and we do not have established manufacturing relationships to support our production schedules. </font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>During fiscal 2003, we terminated our manufacturing relationship with HST, Inc., formerly our sub-contract manufacturer of our HSS and NeoPlanar products. In addition, Amtec Manufacturing, previously the sole manufacturer of our Pure Bass subwoofer units, recently went out of business. In addition to in-house manufacturing of our products, we will need to establish relationships with outside manufacturers to be able to be able to meet our production schedules. Failure to establish quality contract manufacturing could reduce future revenues, adversely affecting financial condition and results of operations.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><b><font size=2>We rely on outside suppliers to provide a large number of components incorporated in our products.</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Our products have a large number of components produced by outside suppliers. In addition, for certain of these items, we qualify only a single source, which can magnify the risk of shortages and decrease our ability to negotiate with our suppliers on the basis of price. In particular, we depend on our HSS piezo-film supplier to provide expertise and materials used in our proprietary HHS emitters. If shortages occur, or if we experience quality problems with suppliers, then our production schedules could be significantly delayed or costs significantly increased, which would have a material adverse effect on our business, liquidity, results of operation and financial position.</font></p>


<p style=' margin-bottom:0pt; margin-top:8pt;'><b><font size=2>Our contracts and subcontracts that are funded by the U.S. government or foreign governments are subject to government regulations and audits and other requirements.</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Government contracts require compliance with various contract provisions and procurement regulations. The adoption of new or modified procurement regulations could have a material adverse effect on our business, financial condition or results of operations or increase the costs of competing for or performing government contracts. If we violate any of these regulations, then we may be subject to termination of these contracts, imposition of fines or exclusion from government contracting and government-approved subcontracting for some specific time period. In addition, our contract and subcontract costs and revenues may be subject to adjustment as a result of audits by government auditors. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><b><font size=2>We derive revenue from government contracts and subcontracts, which are often non-standard, may involve competitive bidding, may be subject to cancellation with or without penalty and may produce volatility in earnings and revenue. </font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Our government business has involved and is expected in the future to involve providing products and services under contracts or subcontracts with U.S. federal, state, local and foreign government agencies. Obtaining contracts and subcontracts from government agencies is challenging, and contracts often include provisions that are not standard in private commercial transactions. For example, government contracts may: </font></p>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>include provisions that allow the government agency to terminate the contract without penalty under some circumstances;  </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>be subject to purchasing decisions of agencies that are subject to political influence;  </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>contain onerous procurement procedures; and  </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>be subject to cancellation if government funding becomes unavailable. </font></td></tr></table>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Securing government contracts can be a protracted process involving competitive bidding. In many cases, unsuccessful bidders may challenge contract awards, which can lead to increased costs, delays and possible loss of the contract for the winning bidder. </font></p>

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<p style=' margin-bottom:0pt; margin-top:8pt;'><b><font size=2>Our Government Group revenues are materially dependant on acceptance of our LRAD products by government, military and developing force protection and emergency response agencies, and if these agencies do not purchase our products, our revenues will be adversely affected.</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>If our LRAD product is not widely accepted by the government, military and the developing force protection and emergency response markets, we may not be able to identify other markets. Government, military and the developing force protection and emergency response agencies may be influenced by claims or perceptions that long range hailing devices are unsafe or may be used in an abusive manner. Sales of our products to these agencies may also be delayed or limited by these claims or perceptions.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><b><font size=2>Any inability to adequately protect our proprietary technologies could harm our competitive position. </font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We are heavily dependent on patent protection to secure the economic value of our technologies. We have both issued and pending patents on our sound reproduction technologies and we are considering additional patent applications. Patents may not be issued for some or all of our pending applications. Claims allowed from existing or pending patents may not be of sufficient scope or strength to protect the economic value of our technologies. Issued patents may be challenged or invalidated. Further, we may not receive patents in all countries where our products can be sold or licensed. Our competitors may also be able to design around our patents. The electronics industry is characterized by vigorous protection and pursuit of intellectual property rights or positions, which have resulted in significant and often protracted and expensive litigation. There is currently no pending litigation against us that questions our
intellectual property rights. Third parties may charge that our technologies or products infringe their patents or proprietary rights. Problems with patents or other rights could potentially increase the cost of our products, or delay or preclude our new product development and commercialization. If infringement claims against us are deemed valid, we may be forced to obtain licenses, which might not be available on acceptable terms or at all. Litigation could be costly and time-consuming but may be necessary to protect our future patent and/or technology license positions, or to defend against infringement claims. A successful challenge to our sound technology could have a negative effect on our business prospects. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><b><font size=2>If our key employees do not continue to work for us, our business will be harmed because competition for replacements is intense. </font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Our performance is substantially dependent on the performance of our executive officers and key technical employees, including Elwood G. Norris, our Chairman. We are dependent on our ability to retain and motivate high quality personnel, especially highly skilled technical personnel. Our future success and growth also depend on our continuing ability to identify, hire, train and retain other highly qualified technical, managerial and sales personnel. Competition for such personnel is intense, and we may not be able to attract, assimilate or retain other highly qualified technical, managerial or sales personnel in the future. The inability to attract and retain the necessary technical, managerial or sales personnel could cause our business, operating results or financial condition to suffer. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><b><font size=2>We may issue preferred stock in the future, and the terms of the preferred stock may reduce the value of your common stock. </font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We are authorized to issue up to 5,000,000 shares of preferred stock in one or more series. Our board of directors may determine the terms of future preferred stock without further action by our stockholders. If we issue additional preferred stock, it could affect your rights or reduce the value of your common stock. In particular, specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with or sell our assets to a third party. These terms may include voting rights, preferences as to dividends and liquidation, conversion and redemption rights, and sinking fund provisions. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><b><font size=2>Our Series D and Series E Preferred Stock financings may result in dilution to our common stockholders. The holders of Series D and Series E Preferred Stock will receive more common shares on conversion if the market price of our common stock declines.</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Dilution of the per share value of our common shares could result from the conversion of the outstanding Series D and Series E Preferred Stock.</font></p>

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<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>The holders of our outstanding shares of Series D Preferred Stock may convert these shares into shares of our common stock at a conversion price equal to the lower of $4.50 or 90% of volume-weighted average price of our common stock for the five trading days prior to conversion. The conversion rate cannot however be lower than $2.00. The $2.00 floor price may however be adjusted downward if we sell securities for less than an effective price of $2.00 per share. As of September 30, 2003, the outstanding 50,000 shares of Series D Preferred Stock were convertible into an aggregate of 120,556 common shares. In addition, the Series D Preferred Stock purchasers received warrants to purchase 2.2 common shares for each share of Series D Preferred Stock purchased. The exercise price of the warrants was initially $4.50 per share, but was reduced to $3.01 per share as a result of anti-dilution provisions in the warrants. The exercise
price for warrants on 495,880 common shares will be subject to further reduction if we sell securities for less than an effective price of $3.01 per share.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>The holders of our outstanding shares of Series E Preferred Stock may convert these shares into shares of our common stock at a conversion price equal to the lower of $3.25 or 90% of volume-weighted average price of our common stock for the five trading days prior to conversion. The conversion rate cannot however be lower than $2.00. As of September 30, 2003, the 263,250 outstanding shares of Series E Preferred Stock were convertible into an aggregate of 838,890 common shares. The Series E Warrants  on 454,547 common shares also contain an antidilution adjustment for certain security sales by the Company below $3.25 per share.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Holders of our common stock could experience substantial dilution from the conversion of the Series D and Series E Preferred Stock and exercise of the related warrants. As a result of the floating conversion price, the holders of Series D and Series E Preferred Stock will receive more common shares on conversion if the price of our common shares declines. To the extent that the Series D or Series E stockholders convert and then sell their common shares, the common stock price may decrease due to the additional shares in the market. This could allow the Series D or Series E stockholders to receive greater amounts of common stock, the sales of which would further depress the stock price. Furthermore, the significant downward pressure on the trading price of our common stock as Series D and Series E Preferred Stock and related warrant holders convert or exercise these securities and sell the common shares received could
encourage short sales by the holders of Series D and Series E Preferred Stock and the related warrants, or other stockholders. This would place further downward pressure on the trading price of our common stock. Even the mere perception of eventual sales of common shares issued on the conversion of the Series D and Series E Preferred Stock or exercise of the related warrants could lead to a decline in the trading price of our common stock.</font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Our stock price is volatile and may continue to be volatile in the future.</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Our common stock trades on the NASDAQ SmallCap Market. The market price of our common stock has fluctuated significantly to date. In the future, the market price of our common stock could be subject to significant fluctuations due to general market conditions and in response to quarter-to-quarter variations in: </font></p>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>our anticipated or actual operating results; </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>developments concerning our sound reproduction technologies; </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>technological innovations or setbacks by us or our competitors; </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>conditions in the consumer electronics market; </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>announcements of merger or acquisition transactions; and </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width=4% ></td><td width=4% nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2><b><font size=2>&#149;</font></b></font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>other events or factors and general economic and market conditions.</font></td></tr></table>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>The stock market in recent years has experienced extreme price and volume fluctuations that have affected the market price of many technology companies, and that have often been unrelated or disproportionate to the operating performance of companies. </font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b>
<a name="Item 2. Properties.">Item 2. Properties</a></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'>
<font size="2">Our executive offices
and our research and development and operational facilities are located at 13114
Evening Creek Drive South, San Diego, California. Our lease for this space
expired in July 2003, but we continue to occupy the space on a month to month
basis. We are in the process of negotiating an amendment of our lease agreement
to extend the term through July 2006. We occupy approximately 23,500 square feet
of office, laboratory, production and warehouse space in these premises with
aggregate monthly payments of approximately $16,000, exclusive of utilities and
costs. This monthly rent is expected to increase to approximately $28,200 per
month upon execution of the lease amendment.&nbsp; We intend to reduce our square
footage in August 2004, which would reduce our aggregate monthly payments under
the amended lease.</font></p>

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<p style=' margin-bottom:0pt; margin-top:8pt;'>
<font size="2">We rent on a monthly
basis office space utilized for development and production of our NeoPlanar
technology, located at 3170 Research Way, Unit 81, Carson City, Nevada. We
occupy approximately 2,200 square feet with a monthly payment of $1,210
excluding utilities.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Our east coast office for the Government Group is located at 1 Main Street, Topsham, Maine. We have a one year lease expiring in August 2004 for 600 square feet  of office space with
a monthly payment of $919.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We believe these facilities are adequate to meet our needs for the next twelve months given current plans. However should we expand our operations, we may be required to obtain additional space or alternative space. We believe there is adequate availability of office and development space in the general vicinity to meet our future needs.</font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b>
<a name="Item 3. Legal Proceedings.">Item 3. Legal Proceedings</a></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'>
<font size="2">In September 2003, we
filed a complaint against eSOUNDideas, Inc., in the Superior Court of
California, County of San Diego, alleging breach of contract and seeking a
declaratory judgement to the effect that a License, Purchase and Marketing
Agreement dated September 28, 2000 (the ESI License Agreement) with eSOUNDideas,
a California partnership, was properly terminated in May 2003. The principals of eSOUNDideas are Greg O. Endsley and Douglas J. Paschall.&nbsp; The principals also
founded a corporation, eSOUNDideas, Inc., which purported to assume the
contractual obligations of eSOUNDideas.&nbsp; We amended the complaint in November
2003 to include eSOUNDideas (the general partnership), Mr. Endsley and Mr.
Paschall as defendants.&nbsp; For convenience, the following discussion refers to
eSOUNDideas and eSOUNDideas, Inc. collectively as ESI.&nbsp; In November 2003, we
filed complaints in the Superior Court of California, County of San Diego,
against Mr. Endsley and Paschall seeking declaratory judgments that options
granted to each of Mr. Endsley and Mr. Paschall in April 2001 were terminated in
October 2002.</font></p>
<p class="MsoNormal"><font size="2">The ESI License Agreement formerly appointed
ESI as an exclusive distributor of HSS products specifically targeted to the
point of sale/purchase, kiosk and display, and the event, trade show and exhibit
markets in North America for five years.&nbsp; In June 2002, we and ESI purported to
enter into an amendment to the ESI License Agreement, extending the term to ten
years commencing on the first delivery of a commercial HSS product to an end
user, and eliminating minimum purchase requirements for the first three years.
We believe the amendment was invalid as it was given in consideration for a
large order from ESI which was later withdrawn by ESI due to a dispute over the
payment and delivery terms of such order. In May 2003, we gave notice to ESI of
termination of the ESI License Agreement. We based our termination on our belief
that ESI had failed to fulfill certain covenants contained in the ESI License
Agreement related to efforts and resources required to maximize the distribution
and sales of HSS products in its product categories.&nbsp; Under the terms of the ESI
License Agreement, the termination was effective immediately, but ESI had sixty
days to cure conditions giving rise to termination and reinstate the agreement.&nbsp;
ESI did not tender a cure within such sixty day period.</font></p>
<p>
<font size="2">The defendants in these cases have filed a cross-complaint against us alleging
breach of contract in connection with the ESI License Agreement and the stock
options granted to Mr. Endsley and Mr. Paschall, breach of the implied covenant
of good faith and fair dealing, intentional interference with contract,
negligent interference with contract, intentional interference with prospective
economic advantage, negligent interference with prospective economic advantage,
defamation, fraud, and violation of California Business and Professions Code
&#167;17200.&nbsp; The defendants seek actual and punitive damages in unstated amounts and
other relief.</font></p>

<p align="center"><font face="Times New Roman" size="2">24</font></p>
<hr size="3" color="#C0C0C0">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
<p><a href="#TABLE OF CONTENTS"><font size="1">TABLE OF CONTENTS</font></a></p>

<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We intend to vigorously pursue our complaints against the defendants in these cases, and to vigorously challenge the defendants&#146; cross-complaint.</font></p>
<p class="MsoNormal"><font size="2">Related to our April 2000 purchase of the
NeoPlanar speaker technology, we have been in dispute with a predecessor owner
of the technology regarding a minimum film royalty for 2002 of approximately
$228,000. We agreed to arbitrate the dispute in front of a single arbitrator in
Seattle, Washington.&nbsp; The technology purchase agreement required a minimum
royalty in 2002 to maintain exclusive film supply. We believe the minimum
royalty for 2002 was not due and film exclusivity was terminated. In September
2003 we accrued $292,500 as the estimated cost to settle this matter and to
buyout all future per unit film royalties. In December 2003 we reached a
non-binding agreement to settle this matter for a payment of $25,000 and the
issuance of 50,000 shares of common stock. However, the definitive documentation
for this settlement is still under negotiation and the dispute may not therefore
settle on the foregoing terms.</font></p>
<p><font size="2">In August 2003 we
reached an agreement and in September 2003 we settled litigation related to the
termination of an outside contract manufacturer, Horizon Sports Technologies,
Inc. d/b/a HST. As part of the settlement we acquired raw materials and
equipment for production valued at approximately $145,000. We paid settlement
costs of $313,000 and recorded additional settlement costs for the $585,000
value assigned to 100,000 shares of common stock issued to HST. As part of the
settlement, HST also entered into a nonexclusive royalty-bearing license to
manufacture and sell speakers based on our Stratified Field technology and
PureBass subwoofer technology and we transferred to HST tooling valued at
approximately $43,000.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>From time to time we are involved in routine litigation incidental to the conduct of our business. Expect as set forth above, there are currently no material pending legal proceedings to which we are a party or to which any of our property is subject.</font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b>
<a name="Item 4. Submission of Matters to a Vote of Security Holders.">Item 4.
Submission of Matters to a Vote of Security Holders</a></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>None.</font></p>

<p style=' margin-bottom:0pt;text-align:center; margin-top:16pt;'><b>
<a name="PART II">PART II</a></b></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b>
<a name="Item 5. Market for Registrant&#146;s Common Equity and Related Shareholder Matters.">
Item 5. Market for Registrant&#146;s Common Equity and Related Shareholder Matters</a></b></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Market Information</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Our common stock is traded and quoted on NASDAQ SmallCap Market under the symbol &#147;ATCO&#148;. The market for our common stock has often been sporadic and limited.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>The following table sets forth the high and low bid quotations for our common stock for the fiscal years ended September 30, 2002 and 2003:</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table width="670" border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; '> <tr >
<td valign=bottom width="489" > <p style='text-align:center;margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="21" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td colspan="5" valign=bottom width="154" >
<div style="border-bottom-style: solid; border-bottom-width: 1">
  <p style='text-align:center;margin-bottom:0pt;margin-top:0in;'><b>
  <font size=2>Bid Quotations</font></b></p>
</div>
</td>
<td width="6" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom width="489" > <p style='text-align:center;margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="21" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=bottom width="56" >
<div style="border-bottom-style: solid; border-bottom-width: 1">
  <p style='text-align:center;margin-bottom:0pt;margin-top:0in;'><b>
  <font size=2>High</font></b></p>
</div>
</td>
<td width="34" valign=bottom > <p ><font size=2>&nbsp;</font></p> </td>
<td colspan="2" valign=bottom width="64" >
<div style="border-bottom-style: solid; border-bottom-width: 1">
  <p style='text-align:center;margin-bottom:0pt;margin-top:0in;'><b>
  <font size=2>Low</font></b></p>
</div>
</td>
<td width="6" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom style='background:#EAF9E8; ' width="489"> <p style='margin-left:0.12in;text-indent:-0.12in;margin-bottom:0pt;margin-top:0in;'><font size=2>Fiscal Year Ending September 30, 2002</font></p> </td>
<td width="21" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td>
<td width="18" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="38" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="34" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td>
<td width="18" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="46" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="6" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom width="489" > <p style='margin-top:0in;margin-left:25.9pt;margin-bottom:.0001pt;text-indent:-8.65pt;'><font size=2>First Quarter</font></p> </td>
<td width="21" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="18" valign=bottom > <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>$</font></p> </td>
<td width="38" valign=bottom > <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>3.50</font></p> </td>
<td width="34" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="18" valign=bottom > <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>$</font></p> </td>
<td width="46" valign=bottom > <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>1.92</font></p> </td>
<td width="6" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom style='background:#EAF9E8; ' width="489"> <p style='margin-top:0in;margin-left:25.9pt;margin-bottom:.0001pt;text-indent:-8.65pt;'><font size=2>Second Quarter</font></p> </td>
<td width="21" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td>
<td width="18" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>$</font></p> </td>
<td width="38" valign=bottom style='background:#EAF9E8;' align="left"> <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>4.50</font></p> </td>
<td width="34" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td>
<td width="18" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>$</font></p> </td>
<td width="46" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>2.20</font></p> </td>
<td width="6" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom width="489" > <p style='margin-top:0in;margin-left:25.9pt;margin-bottom:.0001pt;text-indent:-8.65pt;'><font size=2>Third Quarter</font></p> </td>
<td width="21" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="18" valign=bottom > <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>$</font></p> </td>
<td width="38" valign=bottom align="left" > <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>5.33</font></p> </td>
<td width="34" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="18" valign=bottom > <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>$</font></p> </td>
<td width="46" valign=bottom > <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>3.68</font></p> </td>
<td width="6" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom style='background:#EAF9E8; ' width="489"> <p style='margin-top:0in;margin-left:25.9pt;margin-bottom:.0001pt;text-indent:-8.65pt;'><font size=2>Fourth Quarter</font></p> </td>
<td width="21" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td>
<td width="18" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>$</font></p> </td>
<td width="38" valign=bottom style='background:#EAF9E8;' align="left"> <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>5.25</font></p> </td>
<td width="34" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td>
<td width="18" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>$</font></p> </td>
<td width="46" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>3.69</font></p> </td>
<td width="6" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom width="489" > <p style='margin-left:0.12in;text-indent:-0.12in;margin-bottom:0pt;margin-top:0in;'><font size=2>Fiscal Year Ending September 30, 2003</font></p> </td>
<td width="21" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="18" valign=bottom > <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="38" valign=bottom align="left" > <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="34" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="18" valign=bottom > <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="46" valign=bottom > <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="6" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom style='background:#EAF9E8; ' width="489"> <p style='margin-top:0in;margin-left:25.9pt;margin-bottom:.0001pt;text-indent:-8.65pt;'><font size=2>First Quarter</font></p> </td>
<td width="21" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td>
<td width="18" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>$</font></p> </td>
<td width="38" valign=bottom style='background:#EAF9E8;' align="left"> <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>4.77</font></p> </td>
<td width="34" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td>
<td width="18" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>$</font></p> </td>
<td width="46" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>2.87</font></p> </td>
<td width="6" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom width="489" > <p style='margin-top:0in;margin-left:25.9pt;margin-bottom:.0001pt;text-indent:-8.65pt;'><font size=2>Second Quarter</font></p> </td>
<td width="21" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="18" valign=bottom > <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>$</font></p> </td>
<td width="38" valign=bottom align="left" > <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>3.99</font></p> </td>
<td width="34" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="18" valign=bottom > <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>$</font></p> </td>
<td width="46" valign=bottom > <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>3.00</font></p> </td>
<td width="6" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom style='background:#EAF9E8; ' width="489"> <p style='margin-top:0in;margin-left:25.9pt;margin-bottom:.0001pt;text-indent:-8.65pt;'><font size=2>Third Quarter</font></p> </td>
<td width="21" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td>
<td width="18" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>$</font></p> </td>
<td width="38" valign=bottom style='background:#EAF9E8;' align="left"> <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>6.56</font></p> </td>
<td width="34" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td>
<td width="18" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>$</font></p> </td>
<td width="46" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>3.11</font></p> </td>
<td width="6" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom width="489" > <p style='margin-top:0in;margin-left:25.9pt;margin-bottom:.0001pt;text-indent:-8.65pt;'><font size=2>Fourth Quarter</font></p> </td>
<td width="21" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="18" valign=bottom > <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>$</font></p> </td>
<td width="38" valign=bottom align="left" > <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>7.65</font></p> </td>
<td width="34" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="18" valign=bottom > <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>$</font></p> </td>
<td width="46" valign=bottom > <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>5.43</font></p> </td>
<td width="6" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr> </table>
<br>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>The above quotations reflect inter-dealer prices, without retail markup, markdown or commission and may not represent actual transactions.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We had 1,131 holders of record of our common stock at December 23, 2003 with 19,439,157 shares issued and outstanding. We have never paid a cash dividend on our common stock and do not expect to pay dividends in the foreseeable future.</font></p>

<p align="center"><font face="Times New Roman" size="2">25</font></p>
<hr size="3" color="#C0C0C0">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
<p><a href="#TABLE OF CONTENTS"><font size="1">TABLE OF CONTENTS</font></a></p>

<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>At September 30, 2003, we had five equity incentive plans under which equity securities are or have been authorized for issuance to our employees, consultants or directors: the 2002 Stock Option Plan, the 1997 Stock Option Plan, the 1997 Employee Stock Compensation Plan, the 1992 Incentive Stock Option Plan, and the 1992 Non-Statutory Stock Option Plan. All of these plans have been approved by our stockholders. In addition, from time to time we issued
to employees, directors and service providers special stock options and warrants
to purchase common shares, and these grants were not approved by stockholders. The following table gives information as of September 30, 2003:</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table width="100%" border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; '> <tr >
<td valign=bottom >
<div style="border-bottom-style: solid; border-bottom-width: 1">
  <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;' ><b><font size=1>Plan Category</font></b></p>
</div>
</td>
<td width="2%" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom >
<div style="border-bottom-style: solid; border-bottom-width: 1">
  <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>Number of securities to be</font></b><br> <b><font size=1>issued upon exercise of</font></b><br> <b><font size=1>outstanding options,</font></b><br> <b><font size=1>warrants and rights</font></b></p>
</div>
</td>
<td width="2%" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom >
<div style="border-bottom-style: solid; border-bottom-width: 1">
  <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>Weighted-average exercise</font></b><br> <b><font size=1>price of outstanding</font></b><br> <b><font size=1>options, warrants and</font></b><br> <b><font size=1>rights</font></b></p>
</div>
</td>
<td width="2%" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom >
<div style="border-bottom-style: solid; border-bottom-width: 1">
  <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>Number of securities</font></b><br> <b><font size=1>remaining available for</font></b><br> <b><font size=1>future issuance under</font></b><br> <b><font size=1>equity compensation plans</font></b><br> <b><font size=1>(excluding securities</font></b><br> <b><font size=1>reflected in column (a))</font></b></p>
</div>
</td>
<td width="1%" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="19%" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'>
<u><b><font size=1>(a)</font></b></u></p> </td>
<td width="2%" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'>
<u><b><font size=1>(b)</font></b></u></p> </td>
<td width="2%" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'>
<u><b><font size=1>(c)</font></b></u></p> </td>
<td width="1%" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom > <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;text-align:center;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom style='background:#EAF9E8; '> <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=2>Equity compensation plans approved by security holders</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom style='background:#EAF9E8; '>
<p style='text-align:center;margin-top:2pt;margin-bottom:0pt'><font size=2>1,409,774&nbsp;&nbsp;&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#EAF9E8; '> <p style='margin-top:2pt;margin-bottom:0pt;text-align:center;'><font size=2>$3.87</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#EAF9E8; '>
<p style='text-align:center;margin-top:2pt;margin-bottom:0pt'><font size=2>719,025</font></p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom > <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p >&nbsp;<sup></sup></p> </td>
<td width="11%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'>&nbsp;<sup></sup></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;text-align:center;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom >
<div style="border-bottom-style: solid; border-bottom-width: 1">
  <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=2>Equity compensation plans not approved by security holders</font></p>
</div>
</td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom >
<div style="border-bottom-style: solid; border-bottom-width: 1">
  <p style='text-align:center;margin-top:2pt;margin-bottom:0pt'><font size=2>402,500<sup>(1)</sup> </font></p>
</div>
</td>
<td width="2%" valign=bottom > <p ><sup></sup></p> </td>
<td width="12%" valign=bottom >
<div style="border-bottom-style: solid; border-bottom-width: 1">
  <p style='margin-top:2pt;margin-bottom:0pt;text-align:center;'><font size=2>$5.20</font></p>
</div>
</td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom >
<div style="border-bottom-style: solid; border-bottom-width: 1">
  <p style='text-align:center;margin-top:2pt;margin-bottom:0pt'><font size=2>&#151;</font></p>
</div>
</td>
<td width="1%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=top > &nbsp;</td>
<td width="2%" valign=top > &nbsp;</td>
<td valign=top > &nbsp;</td>
<td width="2%" valign=top > &nbsp;</td>
<td valign=top > &nbsp;</td>
<td width="2%" valign=top > &nbsp;</td>
<td valign=top > &nbsp;</td>
<td width="1%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom style='background:#EAF9E8; '>
<div style="border-bottom-style: double; border-bottom-width: 1">
  <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=2>Total</font></p>
</div>
</td>
<td width="2%" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom style='background:#EAF9E8; '>
<div style="border-bottom-style: double; border-bottom-width: 1">
  <p style='text-align:center;margin-top:2pt;margin-bottom:0pt'><font size=2>1,812,274&nbsp;&nbsp;&nbsp;</font></p>
</div>
</td>
<td width="2%" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#EAF9E8; '>
<div style="border-bottom-style: double; border-bottom-width: 1">
  <p style='margin-top:2pt;margin-bottom:0pt;text-align:center;'><font size=2>$4.17</font></p>
</div>
</td>
<td width="2%" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#EAF9E8; '>
<div style="border-bottom-style: double; border-bottom-width: 1">
  <p style='text-align:center;margin-top:2pt;margin-bottom:0pt'><font size=2>719,025</font></p>
</div>
</td>
<td width="1%" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=top > <p align="center"><font size=1>&nbsp;</font></p>
</td>
  </tr> </table>
<br>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width="4%" ></td><td width="4%" nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>
  (1)</font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Consists of individual special stock option and warrant grants to employees, directors and service providers approved by the Board of Directors from time to time.</font></td></tr></table>
<p style=' margin-bottom:0pt; margin-top:8pt;'><b><font size=2>Recent Sales of Unregistered Securities</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>No securities were sold within the past three years, which were not registered under the Securities Act that were not previously reported in prior quarterly or annual filings or described in the following paragraphs.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>On July 11, 2003, we entered into a Securities Purchase Agreement with certain institutional investors pursuant to which we issued and sold 1,818,180 shares of our common stock at a purchase price of $5.50 per share. In connection with such financing, we also issued warrants to the investors to purchase 454,547 shares of common stock with an exercise price of $6.75 per share. The warrants are exercisable until July 10, 2007. These securities were offered and sold without registration under the Securities Act of 1933 without registration under the Securities Act of 1933 to a limited number of accredited investors in reliance upon the exemption provided by Rule 506 of Regulation D thereunder, and may not be offered or sold in the
United States in the absence of an effective registration statement or exemption from the registration requirements under the Securities Act. An appropriate legend was placed on the shares and the warrants issued, and will be placed on the shares issuable upon exercise of the warrants, unless registered under the Securities Act prior to issuance. In connection with this financing, we entered into a Registration Rights Agreement with the investors, pursuant to which we agreed to prepare and file, within 30 days following the issuance of the securities, a registration statement covering the resale of the common stock sold and issuable upon the exercise of the warrants. We were required to have such registration statement declared effective within 90 days following the date of the issuance of the securities. The registration statement was filed on August 4, 2003, and declared effective by the SEC on August 18, 2003. We paid a placement fee of 5% of the gross proceeds to Olympus
Securities, LLC.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>On September 30, 2003 we issued 100,000 shares of common stock to HST, Inc. in connection with the settlement agreement described above under the heading &#147;Legal Proceedings&#148;. These securities were offered and sold without registration under the Securities Act of 1933 without registration under the Securities Act of 1933 to one accredited investor in reliance upon the exemption provided by Rule 506 of Regulation D thereunder, and may not be offered or sold in the United States in the absence of an effective registration statement or exemption from the registration requirements under the Securities Act. An appropriate legend was placed on the shares.</font></p>

<br>

<p align="center"><font face="Times New Roman" size="2">26</font></p>
<hr size="3" color="#C0C0C0">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
<PAGE>
<p style=' margin-bottom:0pt; margin-top:12pt;'><a href="#TABLE OF CONTENTS">
<font size="1">TABLE OF CONTENTS</font></a></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b>
<a name="Item 6. Selected Financial Data">Item 6. Selected Financial Data</a></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>The following is a summary of selected financial data as of and for the five most recent fiscal periods ended. This data should be read in conjunction with &#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations&#148; and our Financial Statements and the Notes thereto appearing elsewhere in this document.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>For the fiscal years ended September 30,</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table width="100%" border="0" cellspacing=0 cellpadding=0 style='margin-left:1.25pt; border-collapse:collapse'> <tr >
<td valign=bottom style="border-bottom: 1px solid #000000" > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style="border-bottom: 1px solid #000000" > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" colspan="2" valign=bottom style="border-bottom: 1px solid #000000" > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>2003</font></b></p> </td>
<td width="2%" valign=bottom style="border-bottom: 1px solid #000000" > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" colspan="2" valign=bottom style="border-bottom: 1px solid #000000" > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>2002</font></b></p> </td>
<td width="2%" valign=bottom style="border-bottom: 1px solid #000000" > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" colspan="2" valign=bottom style="border-bottom: 1px solid #000000" > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>2001</font></b></p> </td>
<td width="2%" valign=bottom style="border-bottom: 1px solid #000000" > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" colspan="2" valign=bottom style="border-bottom: 1px solid #000000" > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>2000</font></b></p> </td>
<td width="2%" valign=bottom style="border-bottom: 1px solid #000000" > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=bottom style="border-bottom: 1px solid #000000" > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>1999</font></b></p> </td>
<td width="2%" valign=bottom style="border-bottom: 1px solid #000000" > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom style='background:#EAF9E8; '> <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><b><font size=2>Statement of Operations:</font></b></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8;'> <p >&nbsp;<b></b></p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'>&nbsp;<b></b></p> </td>
<td width="9%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'>&nbsp;<b></b></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p >&nbsp;<b></b></p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'>&nbsp;<b></b></p> </td>
<td width="8%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'>&nbsp;<b></b></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p >&nbsp;<b></b></p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'>&nbsp;<b></b></p> </td>
<td width="9%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'>&nbsp;<b></b></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p >&nbsp;<b></b></p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'>&nbsp;<b></b></p> </td>
<td width="8%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'>&nbsp;<b></b></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p >&nbsp;<b></b></p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'>&nbsp;<b></b></p> </td>
<td width="8%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'>&nbsp;<b></b></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p >&nbsp;<b></b></p> </td> </tr> <tr >
<td valign=bottom > <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=2>Net revenues</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="9%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>1,315,426&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>1,010,752&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="9%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>855,342&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>1,433,050&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>823,753&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom style='background:#EAF9E8; '> <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=2>Gross profit (loss)</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="9%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(228,651)</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p >&nbsp;</p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>326,908&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="9%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>277,066&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>382,155&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>204,088&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom > <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=2>Net loss</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="9%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(8,227,013)</font></p> </td>
<td width="2%" valign=bottom > <p >&nbsp;</p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(8,220,132)</font></p> </td>
<td width="2%" valign=bottom > <p >&nbsp;</p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="9%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(5,046,219)</font></p> </td>
<td width="2%" valign=bottom > <p >&nbsp;</p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(3,068,046)</font></p> </td>
<td width="2%" valign=bottom > <p >&nbsp;</p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(3,041,634)</font></p> </td>
<td width="2%" valign=bottom > <p >&nbsp;</p> </td> </tr> <tr >
<td valign=bottom style='background:#EAF9E8; '> <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=2>Net loss available to common stockholders</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="9%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(10,636,241)</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p >&nbsp;</p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(8,503,044)</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p >&nbsp;</p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="9%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(5,166,941)</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p >&nbsp;</p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(7,948,994)</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p >&nbsp;</p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(3,809,486)</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p >&nbsp;</p> </td> </tr> <tr >
<td valign=bottom > <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=2>Net loss per share-basic and diluted </font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="9%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(0.67)</font></p> </td>
<td width="2%" valign=bottom > <p >&nbsp;</p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(0.60)</font></p> </td>
<td width="2%" valign=bottom > <p >&nbsp;</p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="9%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(0.38)</font></p> </td>
<td width="2%" valign=bottom > <p >&nbsp;</p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(0.67)</font></p> </td>
<td width="2%" valign=bottom > <p >&nbsp;</p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(0.33)</font></p> </td>
<td width="2%" valign=bottom > <p >&nbsp;</p> </td> </tr> <tr >
<td valign=bottom style='background:#EAF9E8; '> <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=2>Weighted average number of shares-basic and diluted</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>15,857,569&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="8%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>14,193,508&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>13,563,101&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="8%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>11,868,511&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="8%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>11,408,264&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td> </tr> </table>
<br>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>As of September 30,</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table width="100%" border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; '> <tr >
<td valign=bottom style="border-bottom:1px solid #000000; " > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style="border-bottom:1px solid #000000; " > <p ><font size=1>&nbsp;</font></p> </td>
<td width="11%" colspan="2" valign=bottom style="border-bottom:1px solid #000000; " > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>2003</font></b></p> </td>
<td width="2%" valign=bottom style="border-bottom:1px solid #000000; " > <p ><font size=1>&nbsp;</font></p> </td>
<td width="10%" colspan="2" valign=bottom style="border-bottom:1px solid #000000; " > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>2002</font></b></p> </td>
<td width="2%" valign=bottom style="border-bottom:1px solid #000000; " > <p ><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=bottom style="border-bottom:1px solid #000000; " > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>2001</font></b></p> </td>
<td width="2%" valign=bottom style="border-bottom:1px solid #000000; " > <p ><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=bottom style="border-bottom:1px solid #000000; " > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>2000</font></b></p> </td>
<td width="2%" valign=bottom style="border-bottom:1px solid #000000; " > <p ><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=bottom style="border-bottom:1px solid #000000; " > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>1999</font></b></p> </td>
<td width="2%" valign=bottom style="border-bottom:1px solid #000000; " > <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom > <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' >
<b><font size=2>Balance Sheet:</font></b></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="8%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="8%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="8%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom style='background:#EAF9E8; '> <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=2>Working capital</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="9%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>8,484,210&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="9%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>554,713&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>892,040&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>4,794,743&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>1,096,475&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom > <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=2>Total assets</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="9%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>11,744,371&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="9%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>3,789,634&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>3,837,284&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>7,275,614&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>2,161,036&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom style='background:#EAF9E8; '> <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=2>Long-term obligations</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="9%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>23,097&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="9%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>3,153,012&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="8%" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="8%" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="8%" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom > <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=2>Total stockholders&#146; equity (deficit) </font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="9%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>9,728,171&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="9%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2> (884,882)</font></p> </td>
<td width="2%" valign=bottom > <p >&nbsp;</p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>2,993,495&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>6,829,875&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>1,717,192&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr> </table>






<br>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b>
<a name="Item 7. Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations.">
Item 7. Management&#146;s Discussion and Analysis of Financial Condition and Results
of Operations</a></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><i><b><font size=2>Except for the historical information, the following discussion contains forward-looking statements that are subject to risks and uncertainties. Actual results may differ substantially from those referred to herein due to a number of factors, including but not limited to risks described in the section entitled Risk Factors on page 17 and elsewhere in this Annual Report.</font></b></i></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Overview</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We are an innovator of proprietary sound reproduction technologies and products. Our HyperSonic Sound (HSS) technology is a new method of sound reproduction that creates sound &#147;in the air.&#148; Sound is generated along an air column using ultrasonic frequencies, those above the normal range of hearing. The HSS sound beam is highly directional and maintains sound volume over longer distances than traditional loudspeakers. We believe HyperSonic Sound&#146;s unique features are useful in new sound applications. We believe we are the leader in developing and commercializing parametric loudspeakers.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We have developed additional sound reproduction technologies. Our Long Range Acoustic Device (LRAD) technology produces variable intensity acoustical sound intended for use in long-range delivery of directional sound information, effectively a supercharged megaphone. LRAD products are used as directed long-range hailing and warning systems. Our NeoPlanar technology is a thin film magnetic speaker that produces sound of high quality, low distortion and high volume. NeoPlanar applications include high-end sound systems and public address. Our PureBass extended range woofer employs unique cabinet construction, novel vent configurations and multiple acoustic filters to minimize distortion and provide high output. It provides a high frequency interface with our NeoPlanar panels and other upper range satellite speaker systems.</font></p>

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<font size="1">TABLE OF CONTENTS</font></a></p>

<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Our primary marketing focus is on providing sound reproduction products and components to customers and licensing our technologies for customer applications. When we supply systems or components used in other products to customers, distributors or OEMs, we include our intellectual property fees in the selling prices of the systems or components. We currently produce HSS systems and NeoPlanar panels as components of a sound system. When we license a sound technology, we typically receive a flat fee up-front, with the balance of payments based upon a percentage of net revenues of the products in which our technology is incorporated. Revenues from up-front license fees are recognized ratably over the specified term of the particular license. Contract fees are recorded as services are performed. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Our various technologies are high risk in nature. Our future is largely dependent upon the success of our sound technologies. We invest significant funds in research and development and on patent applications related to our proprietary technologies. Unanticipated technical or manufacturing obstacles can arise at any time and disrupt sales or licensing activities and result in lengthy and costly delays.
Our technologies may not achieve market acceptance sufficient to sustain operations or achieve future profits.</font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Critical Accounting Policies</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We have identified the policies below as critical to our business operations and the understandings of our results of operations. The impact and any associated risks related to these policies on our business operations is discussed throughout Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations when such policies affect our reported and expected financial results.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>In the ordinary course of business, we have made a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ significantly from those estimates under different assumptions and conditions. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require our most difficult, subjective, and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><i><font size=2>Revenue Recognition. </font></i><font size=2>We derive our revenue primarily from two sources: (i) component and product sale revenues and (ii) contract and license fee revenue. Component and product sale revenues are recognized in the periods that products are shipped to customers, FOB shipping point, if a signed contract exists, the fee is fixed and determinable, collection of resulting receivables is probable and there are no remaining obligations. Revenues from ongoing per unit license fees are earned based on units shipped incorporating our patented proprietary technologies and are recognized in the period when
the ultimate customer accepts the product and collectibility is reasonably assured. Revenues from up-front license and other fees and annual license fees are recognized ratably over the specified term of the particular license or agreement.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><i><font size=2>Intangible Assets</font></i><font size=2>. Intangible assets include purchased technology and patents which are amortized over their estimated useful lives. The carrying value of such assets are periodically reviewed and impairments, if any, are recognized when the expected future benefit to be derived from an individual intangible asset is less than its carrying value.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><i><font size=2>Warranty Reserve</font></i><font size=2>.
We establish a warranty reserve based on anticipated warranty claims at the time product revenue is recognized. Factors affecting warranty reserve levels include the number of units sold and anticipated cost of warranty repairs and anticipated rates of warranty claims.
We evaluate the adequacy of the provision for warranty costs each reporting period. See Note 9
to our financial statements for additional information regarding warranties.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><i><font size=2>Guarantees and Indemnifications</font></i><font size=2>. Under
our bylaws,
we have agreed to indemnify our officers and directors for certain events. We also enter
into certain indemnification agreements in the normal course of our business. The Company has no liabilities recorded for such indemnities.</font></p>

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<p style=' margin-bottom:0pt; margin-top:8pt;'><i><font size=2>Stock-Based Compensation</font></i><font size=2>.
We have adopted SFAS No. 123, &#147;Accounting for Stock-Based Compensation,&#148; for disclosure purposes. Under SFAS No. 123,
we measure compensation expense for our stock-based employee compensation plan using the intrinsic value method prescribed in Accounting Principles Board (&#147;APB&#148;) No. 25, &#147;Accounting for Stock Issued to Employees&#148; and its related interpretations.
We provide pro forma disclosure of the effect on net income or loss as if the fair value based method prescribed in SFAS No. 123 has been applied in measuring compensation expense. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><i><font size=2>Research and Development Expenses. </font></i><font size=2>Research and development expenses are salaries and related expenses associated with the development of our proprietary sound technologies and include compensation paid to engineering personnel and fees to outside contractors and consultants.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><i><font size=2>Deferred Tax Asset. </font></i><font size=2>We have provided a full valuation reserve related to our substantial deferred tax assets. In the future, if sufficient evidence of our ability to generate sufficient future taxable income in certain tax jurisdictions becomes apparent, we may be required to reduce our valuation allowances, resulting in income tax benefits in our consolidated statement of operations. We evaluate the realizability of the deferred tax assets and assess the need for valuation allowance quarterly. The utilization of the net operating loss carryforwards could be substantially limited due to restrictions imposed under federal and state laws upon a change in ownership.</font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Off-Balance Sheet Arrangements</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We do not have off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as &#147;special purpose entities&#148; (SPEs).</font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Revenues</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Revenues increased  30% in fiscal 2003 to $1,315,426 compared to $1,010,752 for fiscal 2002. Fiscal 2002 revenues were 18% higher than fiscal 2001 revenues of $855,342. In fiscal 2003 revenues included $1,070,645 of product sales and $244,781 of contract and license revenues. Fiscal 2002 revenues included $693,097 of product sales and $317,655 of contract and license revenues. Fiscal 2001 revenues included $815,859 of product sales and $39,483 of contract and license revenues.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>During fiscal 2002 and 2001 we recorded revenues of $305,208 and $815,859 for portable consumer products. These revenues represented products sourced by us, private labeled under our name and resold to sporting good stores and other retailers. In fiscal 2003 we reduced our marketing emphasis on portable consumer products in order to focus financial, personnel and facility resources on our sound technologies. As a result, sales of portable consumer products in fiscal 2003 totaled $94,980. Sound products provided the balance of fiscal 2003 revenues. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Late in fiscal 2003, with the addition of new personnel, we organized operations into two segments by the end-user markets they serve. Our Business Products and Licensing Group (Business Group) licenses and markets HSS, NeoPlanar and Purebass speakers to companies
which employ audio in consumer, commercial and professional applications. Our Government and Force Protection Systems Group (Government Group) markets LRAD, NeoPlanar and HSS products to government and military customers and to the expanding force protection market. Although the segments became separately managed in the last quarter of fiscal 2003, we have also segmented historical operations for comparable end-user customers for comparison purposes.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Presented below is a summary of revenues by business segment:</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table width="100%" border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; '> <tr >
<td valign=bottom style="border-bottom-style:solid; border-bottom-width:1px" bgcolor="#FFFFFF" bordercolor="#000000" > <p style='margin-top:2pt;margin-bottom:0pt;'><b>
<font size=2>Years Ended September 30,</font></b></p> </td>
<td width="2%" valign=bottom style="border-bottom:1px solid #000000; " > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'>
<font size=2>&nbsp;</font></p> </td>
<td colspan="2" valign=bottom style="border-bottom:1px solid #000000; " > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b>
<font size=2>2003</font></b></p> </td>
<td width="2%" valign=bottom style="border-bottom:1px solid #000000; " > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'>
<font size=2>&nbsp;</font></p> </td>
<td colspan="2" valign=bottom style="border-bottom:1px solid #000000; " > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b>
<font size=2>2002</font></b></p> </td>
<td width="2%" valign=bottom style="border-bottom:1px solid #000000; " > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'>
<font size=2>&nbsp;</font></p> </td>
<td colspan="2" valign=bottom style="border-bottom:1px solid #000000; " > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b>
<font size=2>2001</font></b></p> </td>
<td width="2%" valign=bottom style="border-bottom: 1px solid #000000" > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom style='background:#EAF9E8; '> <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=2>Revenues:</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="8%" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="8%" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Business Group</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>861,091 </font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>922,542 </font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="7%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>855,342 </font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom style='background:#EAF9E8; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Government Group</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#EAF9E8; border-bottom-style:solid; border-bottom-width:1' bordercolor="#EAF9E8"> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>
&nbsp;</font></p> </td>
<td width="8%" valign=bottom style='border-bottom:1px solid #000000; background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>454,335 </font></p> </td>
<td width="2%" valign=bottom style='border-bottom:1px solid #000000; background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='border-bottom:1px solid #000000; background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="8%" valign=bottom style='border-bottom:1px solid #000000; background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>88,210 </font></p> </td>
<td width="2%" valign=bottom style='border-bottom:1px solid #000000; background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='border-bottom:1px solid #000000; background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style='border-bottom:1px solid #000000; background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; border-bottom-style:solid; border-bottom-width:1' bordercolor="#FFFFFF"> <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom > <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style="border-bottom-style: double; border-bottom-width: 1" bordercolor="#FFFFFF" > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom style="border-bottom:1px double #000000; " > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>1,315,426 </font></p> </td>
<td width="2%" valign=bottom style="border-bottom:1px double #000000; " > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style="border-bottom:1px double #000000; " > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom style="border-bottom:1px double #000000; " > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>1,010,752 </font></p> </td>
<td width="2%" valign=bottom style="border-bottom:1px double #000000; " > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style="border-bottom:1px double #000000; " > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="7%" valign=bottom style="border-bottom:1px double #000000; " > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>855,342 </font></p> </td>
<td width="2%" valign=bottom style="border-bottom-style: double; border-bottom-width: 1" bordercolor="#FFFFFF" > <p ><font size=1>&nbsp;</font></p> </td> </tr> </table>
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<font size="1">TABLE OF CONTENTS</font></a></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><i><font size=2>Business Group</font></i><font size=2> - The Business Group reported net revenues of $861,091 in fiscal 2003, representing a 7% decrease from net sales of $922,542 in fiscal 2002. Sound product revenues were $594,703 in 2003, consumer portable product sales were $95,730 and contract and licensing revenues were $170,658. In fiscal 2002 sound product revenues were $255,815, consumer portable product sales were $339,390 and contract and licensing revenues were $295,269. The increase in sound product revenues in 2003 was primarily the result of increased HSS sales offset in part by reduced NeoPlanar sales to yacht customers. Consumer product sales were lower in 2003 as the sales made were from products in inventory at September 30, 2002 and marketing efforts focused on sound products versus portable consumer products.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>In fiscal 2001 Business Group revenues were $855,342. Sound product revenues were $150,898, consumer portable product sales were $664,961 and contract and licensing revenues were $39,483. Sound product sales increased in 2002 and consumer portable product sales decreased compared to 2001 as we began to focus efforts on sound products and reduce our focus on consumer portable products.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><i><font size=2>Government Group</font></i><font size=2> &#150; Government Group net revenues for fiscal 2003 were $454,335 compared to $88,210 in 2002, a 415% increase. Fiscal 2003 revenues included LRAD revenues of $261,106, NeoPlanar revenues of $124,674 and contract fees and other fees of $68,555. LRAD revenues were $85,849 in 2002 and contract fees and other were $2,361. LRAD revenues have been growing as we produce improved and multiple versions of the product and as a result of market awareness of the capabilities of this product. We expect LRAD and NeoPlanar revenues to grow in fiscal 2004.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Government Group net revenues in fiscal 2001 were not significant.</font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Gross Profit</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We encountered warranty issues in the fourth quarter of fiscal 2003 on some of our HSS Generation I product which had a vacuum behind the film on the ultrasonic emitter component. As a result of warranty expenses of $313,187 and  accruals for future warranty work of $319,500, we reported a gross loss on revenues of $228,651 in fiscal 2003 compared to a gross profit of $326,908 in fiscal 2002 and a gross profit of $277,066 in fiscal 2001. Presented below is the gross profit or loss by business segment.</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table width="100%" border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; '> <tr >
<td valign=bottom style='border-bottom:1px solid #000000; background:#FFFFFF; '>
<font size="2"><b>Years Ended September 30,</b></font></td>
<td width="2%" valign=bottom style='border-bottom:1px solid #000000; background:#FFFFFF; '> &nbsp;</td>
<td width="1%" valign=bottom style='border-bottom:1px solid #000000; background:#FFFFFF; '> &nbsp;</td>
<td width="7%" valign=bottom style='border-bottom:1px solid #000000; background:#FFFFFF; ' align="center">
<b><font size="2">2003</font></b></td>
<td width="2%" valign=bottom style='border-bottom:1px solid #000000; background:#FFFFFF; ' align="center"> &nbsp;</td>
<td width="1%" valign=bottom style='border-bottom:1px solid #000000; background:#FFFFFF; ' align="center"> &nbsp;</td>
<td width="7%" valign=bottom style='border-bottom:1px solid #000000; background:#FFFFFF; ' align="center">
<b><font size="2">2002</font></b></td>
<td width="2%" valign=bottom style='border-bottom:1px solid #000000; background:#FFFFFF; ' align="center"> &nbsp;</td>
<td width="1%" valign=bottom style='border-bottom:1px solid #000000; background:#FFFFFF; ' align="center"> &nbsp;</td>
<td width="7%" valign=bottom style='border-bottom:1px solid #000000; background:#FFFFFF; ' align="center">
<b><font size="2">2001</font></b></td>
<td width="2%" valign=bottom style='background:#FFFFFF; ' align="center"> &nbsp;</td> </tr> <tr >
<td valign=bottom style='background:#FFFFFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Gross Profit (Loss):</font></p> </td>
<td width="2%" valign=bottom style='background:#FFFFFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#FFFFFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style='background:#FFFFFF;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#FFFFFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#FFFFFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style='background:#FFFFFF;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#FFFFFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#FFFFFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style='background:#FFFFFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#FFFFFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Business Group</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="7%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(501,748)</font></p> </td>
<td width="2%" valign=bottom > <p >&nbsp;</p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="7%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>256,779&nbsp; </font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="7%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>277,066&nbsp; </font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom style='background:#EAF9E8; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Government Group</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='border-bottom:1px solid #000000; background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style='border-bottom:1px solid #000000; background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>273,097&nbsp; </font></p> </td>
<td width="2%" valign=bottom style='border-bottom:1px solid #000000; background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='border-bottom:1px solid #000000; background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style='border-bottom:1px solid #000000; background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>70,129&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='border-bottom:1px solid #000000; background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='border-bottom:1px solid #000000; background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style='border-bottom:1px solid #000000; background:#EAF9E8; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom style='background:#FFFFFF; '> &nbsp;</td>
<td width="2%" valign=bottom style='background:#FFFFFF; '> &nbsp;</td>
<td width="1%" valign=bottom style='border-bottom:1px solid #000000; background:#FFFFFF; '>
<font size="2">$</font></td>
<td width="7%" valign=bottom style='border-bottom:1px double #000000; background:#FFFFFF; '>
<font size="2">(228,651)</font></td>
<td width="2%" valign=bottom style='border-bottom:1px double #000000; background:#FFFFFF; '> &nbsp;</td>
<td width="1%" valign=bottom style='border-bottom:1px double #000000; background:#FFFFFF; '>

<font size="2">$</font></td>
<td width="7%" valign=bottom style='border-bottom:1px double #000000; background:#FFFFFF; '>
<p align="right">

<font size="2">326,908&nbsp;</font></td>
<td width="2%" valign=bottom style='border-bottom:1px double #000000; background:#FFFFFF; '> &nbsp;</td>
<td width="1%" valign=bottom style='border-bottom:1px double #000000; background:#FFFFFF; '>

<font size="2">$</font></td>
<td width="7%" valign=bottom style='border-bottom:1px double #000000; background:#FFFFFF; '>
<p align="right">

<font size="2">277,066&nbsp;</font></td>
<td width="2%" valign=bottom style='background:#FFFFFF; '> &nbsp;</td> </tr> </table>
<br>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We have changed our emitter design to remove the vacuum element and
we have improved film quality, and we believe our Generation II emitter is more reliable. We expect to make further raw material improvements in January 2004 and additional improvements are expected in Generation III scheduled for later in fiscal 2004. We expect HSS product sales to produce positive margins in fiscal 2004 as we grow manufacturing capacity. Our Government Group has only recently been formed and gross profit historical results are not sufficient for prediction of future results. Gross profit percentage is highly dependent on sales prices, volumes, purchasing costs and overhead allocations. Our various sound products have different margins so product sales mix can materially affect gross profits. We continue to make model changes including raw material and component changes thus changing cost inputs. Margins may vary significantly from period to period.</font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Selling, General and Administrative Expenses</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Selling, general and administrative expenses as a percentage of sales were  370% in fiscal 2003, 301% in 2002 and 271% in 2001. These costs in fiscal 2003 totaled $4,863,711, an increase of $1,817,174 from the $3,046,537 incurred in fiscal 2002. Legal and professional costs increased $1,494,365 to $2,168,967 in fiscal 2003 compared to $674,602 in fiscal 2002. Included in legal and professional costs in 2003 were settlement costs
and accruals of $1,233,754 related to our manufacturing contract termination and a dispute regarding and a buyout of NeoPlanar royalties. A total of $585,000 of the settlement costs were paid through issuance of shares of common stock in fiscal 2003. Personnel costs increased from $1,393,973 in fiscal 2002 to $1,562,852 as a result of both new executives and staff increases. We formed the Government Group in fiscal 2003 to focus efforts on LRAD and government business opportunities.</font></p>

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<p style=' margin-bottom:0pt; margin-top:8pt;'><a href="#TABLE OF CONTENTS">
<font size="1">TABLE OF CONTENTS</font></a></p>

<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Selling, general and administrative expenses were $2,319,690 in fiscal 2001 and increased to $3,046,537 in fiscal 2002. The major factor accounting for the $726,847 increase was an increase in personnel costs of $504,074 to $1,393,973 in fiscal 2002. During fiscal 2002 we added personnel to begin marketing and support of the introduction of HSS. Professional costs also increased by $203,832 from fiscal 2001 to fiscal 2002.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We incurred non-cash selling, general and administrative expenses in each of the three years. In fiscal 2003 we incurred $410,816 of non-cash compensation from the issuance of 109,844 common shares related to purchased technology and $179,995 for the issuance of stock options and warrants to nonemployees. In fiscal 2002 we had non-cash compensation of $304,920 for services paid through the issuance of 74,129 shares of common stock and $517,836 for the issuance of stock options and warrants to nonemployees. In fiscal 2001 we recorded in selling, general and administrative $136,020 for services paid through the issuance of 36,093 shares of common stock and $20,924 for the issuance of stock options to nonemployees. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We may expend additional resources on marketing our sound technologies in the future periods which may increase selling, general and administrative expenses.</font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Research and Development Expenses</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Research and development expenses declined from fiscal 2002 to 2003. Fiscal 2003 expenses totaled $2,493,351 including $315,636 of NeoPlanar technology amortization. Salaries and benefits and consultant costs accounted for $1,780,345 or 71% of these costs. Fiscal 2002 expenses totaled $3,622,063 including $420,808 of amortization. Salaries and benefits and consultant costs accounted for $2,243,586 or 62% of fiscal 2002 research and development costs. Fiscal 2001 expenses were $3,136,109 including $420,829 of amortization. In fiscal 2002 and 2003 we paid an electronics design consultant partially in stock options and incurred non-cash costs of $183,834 and $47,782. In fiscal 2001 outside cash consulting costs and testing supplies totaled $800,173. These costs increased to $1,066,597 in 2002 and declined to $207,390 in 2003 as we made the transition from research and development to product manufacturing and sales. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Research and development costs vary period to period due to the timing of projects, the availability of funds for research and development and the timing and extent of use of outside consulting, design and development firms. We expect fiscal 2004 research and development costs to remain at comparable levels to fiscal 2003 or at lower levels based on current staffing.</font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Loss From Operations</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Total operating expenses were $7,332,549 in fiscal 2003 compared to $6,689,292 in fiscal 2002 and $5,455,799 in 2001. The increase in fiscal 2003 resulted primarily from the increase in selling, general and administrative costs. Due to this increase and the negative gross profit in fiscal 2003, our loss from operations was $7,561,200. The loss from operations was $6,362,384 in fiscal 2002 and $5,178,733 in 2001. We expect increased product sales in fiscal 2004 to reduce the loss from operations from fiscal 2003 levels.</font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Other Income (Expense)</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>The major item in other income (expense) is interest expense. In fiscal 2003 we incurred interest expense of $686,639 which included non-cash amortization of debt discount of $405,000 and $169,753 of interest paid in common stock. In fiscal 2002 we incurred interest expense of $1,872,544 which included non-cash amortization of bond discount of $1,620,000. We incurred no interest expense in 2001. During fiscal 2003 our outstanding long-term debt was converted to equity causing the decline in interest expense from fiscal 2002 to 2003. We do not expect any significant interest costs in fiscal 2004.</font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Net Loss</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>The net loss for fiscal 2003 was $8,227,013 comparable to the net loss of $8,220,132 in fiscal 2002. The net loss for fiscal 2001 was $5,046,219.</font></p>

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<p style=' margin-bottom:0pt; margin-top:12pt;'><a href="#TABLE OF CONTENTS">
<font size="1">TABLE OF CONTENTS</font></a></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Net Loss Available to Common Stockholders</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Net loss available to common stockholders was increased during fiscal 2002 and 2003 in computing net loss per share by imputed deemed dividends based on the value of warrants issued in connection with convertible preferred stock. The net loss available to common stockholders was also increased in fiscal 2002 and 2003 by an additional deemed dividend computed from a discount provision in convertible preferred stock. The imputed deemed dividends are not contractual obligations to pay such imputed dividends. Net loss available to common stockholders is also increased by the 6% accretion (similar to a dividend) on outstanding preferred stock. These amounts aggregated $2,409,228 in fiscal 2003, $282,912 in fiscal 2002 and $120,722 in fiscal 2001 increasing the net loss in each year. Accordingly the net loss available to common stockholders was $10,636,241, $8,503,044 and $5,166,941 in fiscal 2003, 2002 and 2001, respectively.</font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Liquidity and Capital Resources</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We have experienced significant negative cash flow from operating activities including developing and introducing our sound technologies. Our net cash used in operating activities was $5,457,369 for the year ended September 30, 2003. As of September 30, 2003, the net loss of $8,227,013 included certain expenses not requiring the use of cash totaling $2,448,419 or a net of $5,778,594. In addition, cash was used in operating activities through an increase of $272,063 in inventories, an increase of $77,485 in accounts receivable and an increase of $13,719 in prepaid expenses. Further cash provided by operating activities included a $684,492 decrease in accounts payable and accrued liabilities.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>At September 30, 2003, we had accounts receivable of $184,162 as compared to $111,486 at September 30, 2002. This represented approximately 51 days of revenues. Terms with individual customers vary greatly. We typically require pre-payment or a maximum of thirty-day terms for our sound technology components and products. Our receivables can vary dramatically due to overall sales volumes and due to quarterly and seasonal variations in sales and timing of shipments to and receipts from large customers and the timing of contract payments.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>For the year ended September 30, 2003, we used $108,246 for the purchase of laboratory and computer equipment and software and made a $112,007 investment in patents and new patent applications. We anticipate a continued investment in patents in fiscal 2004. Dollar amounts to be invested on these patents are not currently estimable by management.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>At September 30, 2003, we had working capital of $8,484,210 compared to working capital of $554,713 at September 30, 2002. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We have financed our working capital requirements primarily through the sale of common and preferred stock and warrant exercises of stock options, sale of convertible and non-convertible notes and margins from product sales. At September 30, 2003, we had cash of $9,850,358 representing an increase of $8,042,638 from cash at September 30, 2002. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Based on our current cash position and assuming (a) currently planned expenditures and level of operations, (b) continuation of product sales and (c) expected royalty and licensing proceeds, we believe we have sufficient cash for operations for the next twelve months. We believe increased sales of HSS, LRAD and NeoPlanar products will also contribute cash in fiscal 2004. We have flexibility to adjust the level of research and development and selling and administrative expenses based on the availability of resources. However reductions in expenditures could delay development and adversely affect our ability to generate future revenues. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Our total stockholders&#146; equity was $9,728,171 at September 30, 2003 compared with a stockholders&#146; deficit of $884,882 at September 30, 2002. The increase resulted primarily from equity investments during the year offset by the net loss.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Other than cash and cash equivalents, we have no unused sources of liquidity at this time. We expect to incur additional operating losses as a result of expenditures for research and development and marketing costs for our sound products and technologies. The timing and amounts of these expenditures and the extent of our operating losses will depend on many factors, some of which are beyond our control.</font></p>

<PAGE>

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<p style=' margin-bottom:0pt; margin-top:12pt;'><a href="#TABLE OF CONTENTS">
<font size="1">TABLE OF CONTENTS</font></a></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Contractual Commitments and Commercial Commitments</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>The following table summarizes our contractual obligations, including purchase commitments at September 30, 2003, and the effect such obligations are expected to have on our liquidity and cash flow in future periods:</font></p>
<p style=' margin-bottom:0pt;text-align:center; margin-top:8pt;'><b><font size=2>Payments Due by Period</font></b></p>
<p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table width="647" border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; '> <tr >
<td valign=bottom width="282" style="border-bottom: 1px solid #000000" > <p style='margin-top:2pt;margin-bottom:0pt;'><b>
<font size=2>Contractual Obligations</font></b></p> </td>
<td width="18" valign=bottom style="border-bottom: 1px solid #000000" > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'>
<font size=2>&nbsp;</font></p> </td>
<td colspan="2" valign=bottom width="77" style="border-bottom: 1px solid #000000" > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b>
<font size=2>Less than 1</font></b><font size="2"><br> </font> <b><font size=2>Year</font></b></p> </td>
<td width="14" valign=bottom style="border-bottom: 1px solid #000000" > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'>
<font size=2>&nbsp;</font></p> </td>
<td colspan="2" valign=bottom width="68" style="border-bottom: 1px solid #000000" > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b>
<font size=2>1-3 Year</font></b></p> </td>
<td width="12" valign=bottom style="border-bottom: 1px solid #000000" > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'>
<font size=2>&nbsp;</font></p> </td>
<td width="77" valign=bottom style="border-bottom: 1px solid #000000" > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b>
<font size=2>4-5 Years</font></b></p> </td>
<td width="17" valign=bottom style="border-bottom: 1px solid #000000" > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'>
<font size=2>&nbsp;</font></p> </td>
<td width="74" valign=bottom style="border-bottom: 1px solid #000000" > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b>
<font size=2>After 5 Years</font></b></p> </td>
<td width="8" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom style='background:#EAF9E8; ' width="282"> <p style='margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;'><font size=2>Capital leases</font><font size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></p> </td>
<td width="18" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td>
<td width="14" valign=bottom style='background:#EAF9E8; '> <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>$</font></p> </td>
<td width="63" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>12,806</font></p> </td>
<td width="14" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td>
<td width="13" valign=bottom style='background:#EAF9E8; '> <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>$</font></p> </td>
<td width="55" valign=bottom style='background:#EAF9E8;'> <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>25,612</font></p> </td>
<td width="12" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td>
<td width="77" valign=bottom style='background:#EAF9E8;'> <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>$&nbsp; &#151;</font></p> </td>
<td width="17" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td>
<td width="74" valign=bottom style='background:#EAF9E8; '> <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>
$&nbsp; &#151;</font></p> </td>
<td width="8" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom width="282" > <p style='margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;'><font size=2>Operating leases</font></p> </td>
<td width="18" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="14" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="63" valign=bottom > <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>16,600</font></p> </td>
<td width="14" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="13" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="55" valign=bottom > <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>33,828</font></p> </td>
<td width="12" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="77" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>
&nbsp;&nbsp;&nbsp; &#151;</font></p> </td>
<td width="17" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="74" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>
&nbsp;&nbsp;&nbsp; &#151;</font></p> </td>
<td width="8" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom style='border-bottom:1px solid #000000; background:#EAF9E8; ' width="282"> <p style='margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;'><font size=2>Employment agreements</font></p> </td>
<td width="18" valign=bottom style='border-bottom:1px solid #000000; background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="14" valign=bottom style='border-bottom:1px solid #000000; background:#EAF9E8; '> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="63" valign=bottom style='border-bottom:1px solid #000000; background:#EAF9E8; '> <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>232,000</font></p> </td>
<td width="14" valign=bottom style='border-bottom:1px solid #000000; background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="13" valign=bottom style='border-bottom:1px solid #000000; background:#EAF9E8; '> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="55" valign=bottom style='border-bottom:1px solid #000000; background:#EAF9E8; '> <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>220,000</font></p> </td>
<td width="12" valign=bottom style='border-bottom:1px solid #000000; background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="77" valign=bottom style='border-bottom:1px solid #000000; background:#EAF9E8; '> <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>
&nbsp;&nbsp;&nbsp; &#151;</font></p> </td>
<td width="17" valign=bottom style='border-bottom:1px solid #000000; background:#EAF9E8; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="74" valign=bottom style='border-bottom:1px solid #000000; background:#EAF9E8; '> <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>
&nbsp;&nbsp;&nbsp; &#151;</font></p> </td>
<td width="8" valign=bottom style='background:#EAF9E8;'> <p ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=bottom style='border-bottom:3px double #000000; background:#FFFFFF; ' width="282"> <p style='margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;'><font size=2>Total contractual cash obligations</font></p> </td>
<td width="18" valign=bottom style='border-bottom:3px double #000000; background:#FFFFFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="14" valign=bottom style='border-bottom:3px double #000000; background:#FFFFFF; '> <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>$</font></p> </td>
<td width="63" valign=bottom style='border-bottom:3px double #000000; background:#FFFFFF; '> <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>261,406</font></p> </td>
<td width="14" valign=bottom style='border-bottom:3px double #000000; background:#FFFFFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="13" valign=bottom style='border-bottom:3px double #000000; background:#FFFFFF; '> <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>$</font></p> </td>
<td width="55" valign=bottom style='border-bottom:3px double #000000; background:#FFFFFF; '> <p style='text-align:right;margin-bottom:0pt;margin-top:0in;'><font size=2>279,440</font></p> </td>
<td width="12" valign=bottom style='border-bottom:3px double #000000; background:#FFFFFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="77" valign=bottom style='border-bottom:3px double #000000; background:#FFFFFF; '> <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>
$&nbsp; &#151;</font></p> </td>
<td width="17" valign=bottom style='border-bottom:3px double #000000; background:#FFFFFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="74" valign=bottom style='border-bottom:3px double #000000; background:#FFFFFF; '> <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>
$&nbsp; &#151;</font></p> </td>
<td width="8" valign=bottom style='background:#FFFFFF;'> <p ><font size=1>&nbsp;</font></p> </td> </tr> </table>
<br>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>New Accounting Pronouncements</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>The Financial Accounting Standards Board has issued new pronouncements for future implementation as discussed in our financial statements (see page F-11). As discussed in the notes to the financial statements, the implementation of these new pronouncements is not expected to have a material effect on our financial statements.</font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b>
<a name="Item 7A. Quantitative and Qualitative Disclosures About Market Risk">Item 7A. Quantitative and Qualitative Disclosures About Market Risk</a></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Market risk represents the risk of loss that may impact our financial position, results of operations or cash flows due to adverse changes in market prices, including interest rate risk and other relevant market rate or price risks. We do not use derivative financial instruments in our investment portfolio.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We are exposed to some market risk through interest rates, related to our investment of current cash and cash equivalents of approximately $9.8 million. Based on this balance, a change of one percent in interest rate would cause a change in interest income of $98,000. The risk is not considered material and we manage such risk by continuing to evaluate the best investment rates available for short-term high quality investments.</font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b>
<a name="Item 8. Financial Statements and Supplementary Data">Item 8. Financial Statements and Supplementary Data</a></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>The financial statements required by this item begin on page F-1 with the index to financial statements followed by the financial statements.</font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b>
<a name="Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure">Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure</a></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>None.</font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b>
<a name="Item 9A. Controls and Procedures">Item 9A. Controls and Procedures</a></b></p>
<p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>We maintain disclosure controls and procedures designed to ensure that material information related to ATC, including our consolidated subsidiaries, is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms.</font></p>
<p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>(a)</font><font size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font size=2>As of the end of the period covered by this report, we carried out an evaluation under the supervision and with the participation of management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules&nbsp;13a-15(e)&nbsp;and&nbsp;15d-15(e)&nbsp;under the Securities Exchange Act of 1934). Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded, as of the date of such evaluation, that the design and operation of such disclosure controls and procedures were effective.</font></p>

<p align="center"><font face="Times New Roman" size="2">33</font></p>
<hr size="3" color="#C0C0C0">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
<p style=' margin-bottom:0pt; margin-top:6pt;'><a href="#TABLE OF CONTENTS">
<font size="1">TABLE OF CONTENTS</font></a></p>
<p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>(b)</font><font size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font size=2>Except as discussed below, no significant changes were made in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during our most recent fiscal quarter. During the quarter ended September 30, 2003, we determined that the manner in which information brought to the attention of senior management  was  evaluated for  proper   recording  in  the  financial statements should be improved, and we developed new mandatory review procedures for contracts, letters of intent and matters relating to the conduct of litigation.</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Limitations. Our management, including our Principal Executive Officer and Principal Financial Officer, does not expect that our disclosure controls or internal controls over financial reporting will prevent all errors or all instances  of fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system&#146;s objectives will be met. Further, the design of a control system must  reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of
simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and any design may not succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitation of a cost-effective control system, misstatements due to error or fraud may occur and not be detected.</font></p>
<p style=' margin-bottom:0pt;text-align:center; margin-top:16pt;'><b>
<a name="PART III">PART III</a></b></p>
<p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>Certain information required by this Part III is omitted from this Annual Report and is incorporated by reference to our Definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with the Annual Meeting of Stockholders to be held in 2004 (the Proxy Statement).</font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b>
<a name="Item 10. Directors and Executive Officers of the Registrant">Item 10. Directors and Executive Officers of the Registrant
</a> </b></p>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width="0%" ></td><td width="4%" nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>(a)</font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Executive Officers&#151;See &#147;Executive Officers&#148; in Part I, Item 1 hereof.</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width="0%" ></td><td width="4%" nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>(b)</font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Directors&#151;The information required by this Item is incorporated herein by reference to our Proxy Statement.</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width="0%" ></td><td width="4%" nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>(c)</font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Audit Committee Financial Expert&#151;The board of directors has determined that Daniel Hunter is an &#147;audit committee financial expert&#148; and &#147;independent&#148; as defined under applicable SEC and NASDAQ rules. The board&#146;s affirmative determination was based, among other things, upon his over 25 years as a certified public accountant.</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width="0%" ></td><td width="4%" nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>(d)</font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>We have adopted a &#147;Code of Business Conduct and Ethics&#148;, a code of ethics that applies to all employees, including our executive officers. A copy of the Code of Business Conduct and Ethics is posted on our Internet site at www.atcsd.com. In the event we make any amendments to, or grant any waivers of, a provision of the Code of Business Conduct and Ethics that applies to the principal executive officer, principal financial officer, or principal accounting officer that requires disclosure under applicable SEC rules, we intend to disclose such amendment or waiver and the reasons</font><b><font size=2> </font></b><font size=2>therefor on a Form 8-K or on our next periodic report.</font></td></tr></table>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b>
<a name="Item 11. Executive Compensation">Item 11. Executive Compensation</a></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>The information required by this item is incorporated by reference to the Proxy Statement.</font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b>
<a name="Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters">Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters</a></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>The information required by this item is incorporated by reference to the Proxy Statement. </font></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b>
<a name="Item 13. Certain Relationships and Related Transactions">Item 13. Certain Relationships and Related Transactions</a></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>The information required by this item is incorporated by reference to the Proxy Statement. </font></p>

<p align="center"><font face="Times New Roman" size="2">34</font></p>
<hr size="3" color="#C0C0C0">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
<p style='page-break-before:always'><PAGE>
<a href="#TABLE OF CONTENTS"><font size="1">TABLE OF CONTENTS</font></a><p style=' margin-bottom:0pt; margin-top:12pt;'><b>
<a name="Item 14. Principal Accounting Fees and Services">Item 14. Principal Accounting Fees and Services</a></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>The information required by this item is incorporated by reference to the Proxy Statement. </font></p>
<p style=' margin-bottom:0pt;text-align:center; margin-top:16pt;'><b>
<a name="PART IV">PART IV</a></b></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b>
<a name="Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K">Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K</a></b></p>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width="0%" ></td><td width="4%" nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>(a)</font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>The following documents are filed as part of this report: </font></td></tr></table>
<p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table width="100%" border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; '> <tr >
<td valign=top style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;'><b><font size=2>Financial Statements:</font></b></p> </td>
<td width="23" valign=bottom style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td valign=top style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;'><font size=2>Report of Independent Certified Public Accountants</font></p> </td>
<td width="23" valign=bottom style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt; text-align:right;'><font SIZE=2>F-2</font></p> </td> </tr> <tr >
<td valign=top style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt;'><font size=2>Balance Sheets as of September 30, 2003 and 2002</font></p> </td>
<td width="23" valign=bottom style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt; text-align:right;'><font SIZE=2>F-3</font></p> </td> </tr> <tr >
<td valign=top style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:2.0pt;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;'><font size=2>Statements of Operations for the Years Ended September 30, 2003, 2002 and 2001</font></p> </td>
<td width="23" valign=bottom style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td valign=bottom style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt; text-align:right;'><font SIZE=2>F-4</font></p> </td> </tr> <tr >
<td valign=top style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:2.0pt;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;'><font size=2>Statements of Stockholders&#146; Equity for the Years Ended September 30, 2003, 2002 and 2001</font></p> </td>
<td width="23" valign=bottom style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td valign=bottom style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt; text-align:right;'><font SIZE=2>F-5</font></p> </td> </tr> <tr >
<td valign=top style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:2.0pt;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;'><font size=2>Statements of Cash Flows for the Years Ended September 30, 2003, 2002 and 2001</font></p> </td>
<td width="23" valign=bottom style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td valign=bottom style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt; text-align:right;'><font SIZE=2>F-6</font></p> </td> </tr> <tr >
<td valign=top style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:2.0pt;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;'><font size=2>Summary of Accounting Policies</font></p> </td>
<td width="23" valign=bottom style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt; text-align:right;'><font SIZE=2>
F-7 - F-12</font></p> </td> </tr> <tr >
<td valign=top style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:2.0pt;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;'><font size=2>Notes to Financial Statements</font></p> </td>
<td width="23" valign=bottom style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt; text-align:right;'><font SIZE=2>
F-13- F-26</font></p> </td> </tr> <tr >
<td valign=top style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:2.0pt;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;'><font size=2>Schedule II &#150; Valuation and Qualifying Accounts</font></p> </td>
<td width="23" valign=bottom style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin-left:0;margin-bottom:0pt;margin-top:2.0pt; text-align:right;'><font SIZE=2>F-27</font></p> </td> </tr> </table>
<br>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><a name="Exhibit Index">Exhibit Index</a></b></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>3. Articles and Bylaws</font></b></p>
<p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table width="100%" border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; '> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>3.1</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Certificate of Incorporation of American Technology Corporation (Delaware) dated March 1, 1992. Filed as Exhibit 2.1 on Form 10-SB effective August 1, 1994.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>3.1.1</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Amendment to Certificate of Incorporation of American Technology Corporation dated March 24, 1997 and filed with Delaware on April 22, 1997. Filed as Exhibit 3.1.1 on Form 10-QSB for March 31, 1997.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>3.1.2</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Corrected Certificate of Designations of Series A Convertible Preferred Stock dated and filed with Delaware on August 25, 1997. Filed as Exhibit 3.1.3 on Form 8-K dated August 29, 1997.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>3.1.3</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Corrected Certificate of Designations of Series B Convertible Preferred Stock filed with Delaware on December 23, 1998. Filed as Exhibit 3.1.4 on Form 10-KSB dated December 29, 1998.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>3.1.4</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Corrected Certificate of Designation of Series C Preferred Stock filed with Delaware on April 19, 2000. Filed as exhibit 3.1.5 on Form 8-K dated April 19, 2000.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>3.1.5</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Certificate of Designation of Series D Preferred Stock filed with Delaware on May 3, 2002. Filed as exhibit 3.1 on Form 10-Q for the quarter ended March 31, 2002.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>3.1.6</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Certificate of Amendment to Certificate of Incorporation filed with Delaware on September 26, 2002. Filed as exhibit 3.1.6 on Form 10-K for the year ended September 30, 2002.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>3.1.7</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Certificate of Designation of Series E Preferred Stock filed with Delaware on February 28, 2003. Filed as exhibit 4.2 on Form 8-K dated March 6, 2003.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>3.2</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Bylaws of American Technology Corporation. Filed as Exhibit 2.3 on Form 10-SB effective August 1, 1994</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> </table>

<p align="center"><font face="Times New Roman" size="2">35</font></p>
<hr size="3" color="#C0C0C0">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
<p style=' margin-bottom:0pt; margin-top:12pt;'><a href="#TABLE OF CONTENTS">
<font size="1">TABLE OF CONTENTS</font></a></p>
<p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>10. Material Contracts</font></b></p>
<p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table width="100%" border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; '> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.1</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Royalty Agreement between ATC and Elwood G. Norris dated September 3, 1985 filed as Exhibit 6.2 on Form 10-SB effective August 1, 1994.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.2</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Assignment of Technology Agreement between ATC and Elwood G. Norris dated March 2, 1992. Filed as Exhibit 6.3 on Form 10-SB effective August 1, 1994.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.2.1</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Addendum Agreement to Assignment of Technology Agreement between ATC and Elwood G. Norris dated December 2, 1996. Filed as Exhibit 10.3.1 on Form 10-KSB for September 30, 1996.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.3</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>1992 Incentive Stock Option Plan adopted by the Board of Directors on March 2, 1992 and approved by the shareholders on June 19, 1992. Filed as Exhibit 6.8 on Form 10-SB effective August 1, 1994.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.3.1</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Standard form of Incentive Stock Option Plan Agreement. Filed as Exhibit 6.8.1 on Form 10-SB effective August 1, 1994.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.4</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>1992 Non-Statutory Stock Option Plan. Filed as Exhibit 6.9 on Form 10-SB effective August 1, 1994.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.5</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Sublease agreement between ATC and Smiths Industries Aerospace &amp; Defense Systems, Inc. as amended, dated September 1, 2000.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.6</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>1997 Employee Stock Compensation Plan of ATC dated March 10, 1997 filed as Exhibit 10.11 on Form S-8 dated March 24, 1997.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.7</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Employment Agreement dated as of September 1, 1997 between ATC and Elwood G. Norris filed as Exhibit 10.16 on Form 10-KSB for September 30, 1997.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.8</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>1997 Stock Option Plan as adopted on January 23, 1998 filed as Exhibit 10.1 on Form S-8 dated July 27, 1998.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.9</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Employment Agreement dated July 8, 1998 between ATC and James Croft. Filed as Exhibit 10.14 on Form 10-KSB dated December 29, 1998.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.10</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Employment Agreement effective as of October 15, 2002 between the Company and Terry Conrad. Filed as exhibit 10.10 to Form 10-K for the year ended September 30, 2002.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.11</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>2002 Stock Option Plan. Filed as Exhibit 99.1 on Form S-8 dated November 18, 2002.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.12</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Form of 12% Convertible Subordinated Promissory Note due December 31, 2002 aggregating $2,025,000 granted to accredited investors (individual notes differ as to holder, amount and issuance date). Filed as Exhibit 4.11 on Form 8-K dated October 12, 2001.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.12.1</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Amendment to 12% Convertible Subordinated Promissory Note dated November 19, 2002. Filed as Exhibit 10.12.1 to Form 10-K for the year ended September 30, 2002.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.13</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Form of Stock Purchase Warrant exercisable until September 30, 2006 granted to accredited investors for an aggregate of 1,012,500 common shares (individual warrants differ as to holder, number of shares and issuance date). Filed as Exhibit 4.12 on Form 8-K dated October 12, 2001.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.14</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Series D Stock and Warrant Purchase Agreement dated May 3, 2002. Filed as Exhibit 10.1 to Form 10-Q for the quarter ended March 31, 2002.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.14.1</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Amendment No. 1 to Series D Preferred Stock and Warrant Purchase Agreement dated July 3, 2002. Filed as Exhibit 10.3 to Form 10-Q for the quarter ended June 30, 2002.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.15</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Form of Stock Purchase Warrant exercisable until March 31, 2007 granted to investors for an aggregate of 517,880 common shares (individual warrants differ as to holder, number of shares and issuance date). Filed as Exhibit 10.2 to Form 10-Q for the quarter ended March 31, 2002.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> &nbsp;</td>
<td valign=top style=' height:.05in'> &nbsp;&nbsp;</td> </tr>
<tr style='height:.05in'>
<p>&nbsp;</p>
  </tr>
</table>

<p align="center"><font face="Times New Roman" size="2">36</font></p>
<hr size="3" color="#C0C0C0">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
<p><a href="#TABLE OF CONTENTS"><font size="1">TABLE OF CONTENTS</font></a></p>

<table width="100%" border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; '> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.16</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Form of 8% Senior Secured Promissory Note due December 31, 2003 aggregating $1,500,000 granted to accredited investors (individual notes differ as to holder and amount). Filed as Exhibit 4.1 on Form 8-K dated October 7, 2002.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.16.1</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Form of Amendment to 8% Senior Secured Promissory Note. Filed as exhibit 4.6 to Form 8-K dated March 6, 2003.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.17</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Form of Security Agreement. Filed as Exhibit 4.2 on Form 8-K dated October 7, 2002.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.18</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>License Agreement between ATC and Harman International Industries, Inc. dated August 24, 2001. Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934. Filed as exhibit 10.19 to Form 10-K for the year ended September 30, 2002.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.19</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Series E Preferred Stock and Warrant Purchase Agreement dated February 28, 2003. Filed as Exhibit 4.1 to Form 8-K filed on March 6, 2003.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.20</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Form of Stock Purchase Warrant exercisable until December 31, 2007 granted to accredited investors for an aggregate of 514,875 common shares (individual warrants differ as to holder, number of shares and issuance date). Filed as Exhibit 4.3 on Form 8-K dated March 6, 2003.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.21</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Employment agreement/offer letter of James M. Irish dated January 27, 2003. Filed as exhibit 10.5 to Form 10-Q for the quarter ended March 31, 2003.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.22</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Stock Purchase Warrant exercisable until September 30, 2007 granted to Sunrise Capital, Inc. for 100,000 common shares. Filed as exhibit 4.4 to Form S-3 dated May 29, 2003.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.23</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Stock Purchase Warrant exercisable until April 4, 2008 granted to Jonathan Berg for 50,000 common shares. Filed as exhibit 4.5 to Form S-3 dated May 29, 2003.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.24</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Securities Purchase Agreement dated July 11, 2003. Filed as Exhibit 4.1 to Form 8-K dated July 17, 2003.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.25</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Registration Rights Agreement dated July 11, 2003. Filed as Exhibit 4.2 to Form 8-K dated July 17, 2003.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.26</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Form of Common Stock Warrant exercisable until July 10, 2007 granted to accredited investors for an aggregate of 454,547 common shares (individual warrants differ as to holder, number of shares and issuance date). Filed as Exhibit 4.3 to Form 8-K dated July 17, 2003.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.27</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>License and Remarketer Agreement between ATC and General Dynamics Armament and Technical Products, Inc. dated February 14, 2003.*  Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.28.1</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>License and Remarketer Agreement between ATC and Bath Iron Works Corporation dated February 13, 2003. *  Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934.</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>10.28.2</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Assignment of License and Remarketer Agreement from Bath Iron Works Corporation to General Dynamics Armament and Technical Products, Inc., dated September 23, 2003.*</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>
10.29</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Employment Agreement of Kalani Jones dated August 28, 2003, as amended.*</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>
10.30</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Employment Agreement of Carl Gruenler, as amended.*</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> </table>

<p align="center">&nbsp;</p>

<p align="center"><font face="Times New Roman" size="2">37</font></p>
<hr size="3" color="#C0C0C0">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
<a href="#TABLE OF CONTENTS"><font size="1">TABLE OF CONTENTS</font></a><p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>23 Consents of Experts and Council</font></b></p>
<p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table width="100%" border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; '> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>23.1</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Consent of BDO Seidman, LLP*</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td colspan="2" valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><b><font size=2>Certifications</font></b></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>31.1</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Certification of Elwood G. Norris, Principal Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section&nbsp;302 of the Sarbanes-Oxley Act of 2002*</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>31.2</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Certification of Carl Gruenler, Principal Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section&nbsp;302 of the Sarbanes-Oxley Act of 2002.*</font></p> </td> </tr> <tr  style='height:.05in'>
<td width="88" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="88" valign=top > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>32.1</font></p> </td>

<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=2>Certification pursuant to 18 U.S.C. Section&nbsp;1350, as adopted pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002, executed by Elwood G. Norris, Principal Executive Officer, and Carl Gruenler, Principal Financial Officer.*</font></p> </td> </tr> </table>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>* Filed concurrently herewith</font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>(b) </font><u><font size=2>Reports on Form 8-K</font></u><font size=2> </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>We filed a Form 8-K on September 24, 2003 containing disclosure in Item 5, 7 and 12.</font><br><font size=2>We filed a Form 8-K on September 22, 2003 containing disclosure in Item 5 and 7.</font><br><font size=2>We filed a Form 8-K on July 17, 2003 containing disclosure in Item 5 and 7.</font></p>


<p align="center"><font face="Times New Roman" size="2">38</font></p>
<hr size="3" color="#C0C0C0">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
<p style=' margin-bottom:0pt;text-align:left; margin-top:16pt'>
<a href="#TABLE OF CONTENTS"><font size="1">TABLE OF CONTENTS</font></a></p>
<p style=' margin-bottom:0pt;text-align:center; margin-top:16pt;'><b>
<a name="SIGNATURES">SIGNATURES</a></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. </font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table align=center border="0" cellspacing=0 cellpadding=0 style='margin-left:.4pt;border-collapse: collapse'> <tr >
<td width="286" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="15" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="30" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="286" valign=bottom > <p style='margin-top:0in; margin-left:-.55pt;margin-bottom:.0001pt;text-indent:.55pt;'><b><font SIZE=2>AMERICAN TECHNOLOGY CORPORATION</font></b><font size=2> </font><br> <font size=2>
December 29, 2003</font></p> </td> </tr> <tr >
<td width="286" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><br > <br > </p> </td>
<td width="15" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="30" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><font size=2>By&nbsp;&nbsp;</font></p> </td>
<td width="286" valign=bottom style='border-bottom: solid .5pt gray'> <p style='margin-bottom:0pt;margin-top:0in;'><br > <br >
<font size="2">/s/ ELWOOD G. NORRIS</font></p> </td> </tr> <tr >
<td width="286" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="15" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="30" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="286" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>Elwood G. Norris</font><br> <font size=2>(Chairman of the Board) </font><br> <font size=2>Principal Executive Officer</font></p> </td> </tr> </table>
<br>
<p style=' margin-bottom:0pt;text-align:center; margin-top:16pt;'><b><font SIZE=2>POWER OF ATTORNEY</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Know all persons by these presents, that each person whose signature appears below constitutes and appoints Elwood G. Norris and Carl Gruenler, and each of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place, and stead, in any and all capacities, to sign any and all amendments to this Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming that all said attorneys-in-fact and agents, or any of them or their or his substitute or substituted, may
lawfully do or cause to be done by virtue thereof. </font></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of registrant in the capacities and on the dates indicated.</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table border="0" cellspacing=0 cellpadding=0 style='margin-left:.4pt;border-collapse: collapse'> <tr >
<td width="306" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="13" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="31" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="306" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><br> <font size=2>Date:
December 29, 2003</font></p> </td>
<td width="13" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="31" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><font size=2>By&nbsp;</font></p> </td>
<td colspan="2" valign=bottom style=' border-bottom: solid .5pt gray'> <p style='margin-bottom:0pt;margin-top:0in;'><br> <font size=2>/s/ ELWOOD G. NORRIS</font></p> </td> </tr> <tr >
<td width="306" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="13" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="31" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="33" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="242" valign=top style='border-top: solid .5pt gray; '> <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>Elwood G. Norris </font><br> <font size=2>Chairman of the Board and Director</font><br> <font size=2>(Principal Executive Officer)</font></p> </td> </tr> </table>
<p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table border="0" cellspacing=0 cellpadding=0 style='margin-left:.4pt;border-collapse: collapse'> <tr >
<td width="306" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="13" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="31" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="306" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><br> <font size=2>Date:
December 29, 2003</font></p> </td>
<td width="13" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="31" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><font size=2>By&nbsp;</font></p> </td>
<td colspan="2" valign=bottom style=' border-bottom: solid .5pt gray'> <p style='margin-bottom:0pt;margin-top:0in;'><br> <font size=2>/s/ CARL GRUENLER</font></p> </td> </tr> <tr >
<td width="306" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="13" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="31" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="33" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="242" valign=top style='border-top: solid .5pt gray; '> <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>Carl Gruenler, Vice President, Military Operations and Interim </font><br> <font size=2>Chief Financial Officer</font><br> <font size=2>(Principal Financial and Accounting Officer)</font></p> </td> </tr> </table>
<p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table border="0" cellspacing=0 cellpadding=0 style='margin-left:.4pt;border-collapse: collapse'> <tr >
<td width="306" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="13" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="31" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="306" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><br> <font size=2>Date:
December 29, 2003</font></p> </td>
<td width="13" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="31" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><font size=2>By&nbsp;</font></p> </td>
<td colspan="2" valign=bottom style=' border-bottom: solid .5pt gray'> <p style='margin-bottom:0pt;margin-top:0in;'><br> <font size=2>/s/ RICHARD M. WAGNER</font></p> </td> </tr> <tr >
<td width="306" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="13" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="31" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="33" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="242" valign=top style='border-top: solid .5pt gray; '> <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>Richard M. Wagner </font><br> <font size=2>Director</font></p> </td> </tr> </table>
<p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table border="0" cellspacing=0 cellpadding=0 style='margin-left:.4pt;border-collapse: collapse'> <tr >
<td width="306" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="13" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="31" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="306" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><br> <font size=2>Date:
December 29, 2003</font></p> </td>
<td width="13" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="31" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><font size=2>By&nbsp;</font></p> </td>
<td colspan="2" valign=bottom style=' border-bottom: solid .5pt gray'> <p style='margin-bottom:0pt;margin-top:0in;'><br> <font size=2>/s/ DAVID J. CARTER</font></p> </td> </tr> <tr >
<td width="306" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="13" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="31" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="33" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="242" valign=top style='border-top: solid .5pt gray; '> <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>David J. Carter </font><br> <font size=2>Director</font></p> </td> </tr> </table>
<p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table border="0" cellspacing=0 cellpadding=0 style='margin-left:.4pt;border-collapse: collapse'> <tr >
<td width="306" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="13" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="31" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="306" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><br> <font size=2>Date:
December 29, 2003</font></p> </td>
<td width="13" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="31" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><font size=2>By&nbsp;</font></p> </td>
<td colspan="2" valign=bottom style=' border-bottom: solid .5pt gray'> <p style='margin-bottom:0pt;margin-top:0in;'><br> <font size=2>/s/ DANIEL HUNTER</font></p> </td> </tr> <tr >
<td width="306" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="13" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="31" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="33" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="242" valign=top style='border-top: solid .5pt gray; '> <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>Daniel Hunter </font><br> <font size=2>Director</font></p> </td> </tr> </table>

<p align="center"><font face="Times New Roman" size="2">39</font></p>
<hr size="3" color="#C0C0C0">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
<p>&nbsp;</p>

<p><a href="#TABLE OF CONTENTS"><font size="1">TABLE OF CONTENTS</font></a></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td width="60%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><b><font size="2">American
    Technology Corporation</font></b><br>
    <b><font size="2">Index to <a name="Financial Statements">Financial Statements</a></font></b></td>
  </tr>
  <tr>
    <td valign="bottom">
    <div style="border:none;border-bottom:solid .05em;padding:0in 0in 1.0pt 0in">
      <div style="border:none;border-bottom:solid .25em;padding:0in 0in 1.0pt 0in">
      </div>
    </div>
    </td>
  </tr>
</table>
<p style=" margin-bottom:0pt; margin-top:0pt;"><font size="2">&nbsp;</font></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td valign="bottom">
    <p style="margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Report of Independent Certified Public Accountants</font></td>
    <td width="6%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;text-align:right;">
    <font SIZE="2">F-2</font></td>
  </tr>
  <tr style="height:.05in">
    <td valign="top" style=" height:.05in">
    <p style="margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom" style=" height:.05in">
    <p style="margin-bottom:0pt;margin-top:0in;text-align:right;">
    <font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Balance Sheets as of September 30, 2003 and 2002</font></td>
    <td width="6%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;text-align:right;">
    <font SIZE="2">F-3</font></td>
  </tr>
  <tr style="height:.05in">
    <td valign="top" style=" height:.05in">
    <p style="margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom" style=" height:.05in">
    <p style="margin-bottom:0pt;margin-top:0in;text-align:right;">
    <font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Statements of Operations for the Years Ended </font><br>
    <font size="2">September 30, 2003, 2002 and 2001</font></td>
    <td width="6%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;text-align:right;">
    <font SIZE="2">F-4</font></td>
  </tr>
  <tr style="height:.05in">
    <td valign="top" style=" height:.05in">
    <p style="margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom" style=" height:.05in">
    <p style="margin-bottom:0pt;margin-top:0in;text-align:right;">
    <font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Statements of Stockholders&#146; Equity (Deficit) for the Years
    Ended </font><br>
    <font size="2">September 30, 2003, 2002 and 2001</font></td>
    <td width="6%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;text-align:right;">
    <font SIZE="2">F-5</font></td>
  </tr>
  <tr style="height:.05in">
    <td valign="top" style=" height:.05in">
    <p style="margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom" style=" height:.05in">
    <p style="margin-bottom:0pt;margin-top:0in;text-align:right;">
    <font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Statements of Cash Flows for the Years Ended </font><br>
    <font size="2">September 30, 2003, 2002 and 2001</font></td>
    <td width="6%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;text-align:right;">
    <font SIZE="2">F-6</font></td>
  </tr>
  <tr style="height:.05in">
    <td valign="top" style=" height:.05in">
    <p style="margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom" style=" height:.05in">
    <p style="margin-bottom:0pt;margin-top:0in;text-align:right;">
    <font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Summary of Accounting Policies</font></td>
    <td width="6%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;text-align:right;">
    <font SIZE="2">F-7 &#150; F-12</font></td>
  </tr>
  <tr style="height:.05in">
    <td valign="top" style=" height:.05in">
    <p style="margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom" style=" height:.05in">
    <p style="margin-bottom:0pt;margin-top:0in;text-align:right;">
    <font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Notes to Financial Statements</font></td>
    <td width="6%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;text-align:right;">
    <font SIZE="2">F-13- F-26</font></td>
  </tr>
  <tr style="height:.05in">
    <td valign="top" style=" height:.05in">
    <p style="margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom" style=" height:.05in">
    <p style="margin-bottom:0pt;margin-top:0in;text-align:right;">
    <font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Schedule II &#150; Valuation and Qualifying Accounts</font></td>
    <td width="6%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;text-align:right;">
    <font SIZE="2">F-27</font></td>
  </tr>
</table>
<p><br>
<br>
</p>
<p style="margin-bottom:0pt;text-align:center"><font size="2">F-1</font></p>
<p><br>
</p>
<hr noshade align="center" width="100%" size="2">
<p style="page-break-before:always"><a href="#TABLE OF CONTENTS"><font size="1">
TABLE OF CONTENTS</font></a></p>

<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td width="60%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><b><font size="2">Report of
    Independent Certified Public Accountants</font></b></td>
  </tr>
  <tr>
    <td valign="bottom">
    <div style="border:none;border-bottom:solid .05em;padding:0in 0in 1.0pt 0in">
      <div style="border:none;border-bottom:solid .25em;padding:0in 0in 1.0pt 0in">
      </div>
    </div>
    </td>
  </tr>
</table>
<p><br>
</p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">To the
Stockholders and Board of Directors</font><br>
<font size="2">American Technology Corporation</font><br>
<font size="2">San Diego, California</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">We have audited
the accompanying balance sheets of American Technology Corporation as of
September 30, 2003 and 2002, and the related statements of operations,
stockholders&#146; equity (deficit) and cash flows for each of the three years in the
period ended September 30, 2003. We have also audited the schedules listed in the
accompanying index. These financial statements and schedules are the
responsibility of the Company&#146;s management. Our responsibility is to express an
opinion on these financial statements based on our audits.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">We conducted our
audits in accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements and schedules.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the financial statements and schedules. We believe that our audits provide a
reasonable basis for our opinion.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">In our opinion,
the financial statements referred to above present fairly, in all material
respects, the financial position of American Technology Corporation at September
30, 2003 and 2002, and the results of its operations and its cash flows for each
of the three years in the period ended September 30, 2003 in conformity with
accounting principles generally accepted in the United States of America.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">Also, in our
opinion, the schedules present fairly, in all material respects, the information
set forth therein.</font></p>
<p style=" margin-bottom:0pt; margin-top:0pt;"><font size="2">&nbsp;</font></p>
<table width="65%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td width="29%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="3%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="26%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td width="29%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><br>
    <font size="2">/s/ BDO SEIDMAN, LLP</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="3%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="2">&nbsp;</font></td>
    <td width="26%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><br>
    <br>
    </td>
  </tr>
  <tr>
    <td width="29%" valign="top">
    <p style="margin-bottom:0pt;margin-top:0in;"><br>
    <font size="2">Costa Mesa, CA</font><br>
    <font size="2">December 5, 2003</font></td>
    <td width="1%" valign="top">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="3%" valign="top">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="26%" valign="top">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p style=" margin-bottom:0pt; margin-top:0pt;"><font size="2">&nbsp;</font></p>
<p><br>
</p>
<p style="margin-bottom:0pt;text-align:center"><font size="2">F-2</font></p>
<p><br>
</p>
<hr noshade align="center" width="100%" size="2">
<p style="page-break-before:always"><a href="#TABLE OF CONTENTS"><font size="1">
TABLE OF CONTENTS</font></a></p>

<p style=" margin-bottom:0pt;text-align:center; margin-top:16pt;"><b>
<font size="2">American Technology Corporation</font></b></p>
<p style=" margin-bottom:0pt;text-align:center; margin-top:8pt;"><font SIZE="2">
BALANCE SHEETS</font></p>
<p style=" margin-bottom:0pt; margin-top:0pt;">&nbsp;</p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;text-align: left;"><b>
    <font size="1">September 30,</font></b></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">2003</font></b></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">2002</font></b></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <b><font SIZE="2">ASSETS</font></b></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <b><font size="2">Current Assets:</font></b></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Cash</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">$</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">9,850,358 </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">$</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">1,807,720 </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Trade accounts receivable, less allowance of $25,000 and
    $20,191 for doubtful accounts</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">184,162 </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">111,486 </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Inventories</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">408,944 </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">136,881 </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Prepaid expenses and other</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">33,849 </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">20,130 </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <b><font size="2">Total current assets</font></b></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">10,477,313 </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">2,076,217 </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <b><font size="2">Equipment, </font></b><font size="2">net</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">200,262 </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">363,448 </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <b><font size="2">Patents, </font></b><font size="2">net</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">1,066,796 </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">1,034,333 </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <b><font size="2">Purchased technology, </font></b><font size="2">net</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">315,636 </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <b><font size="2">Total assets</font></b></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">$</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">11,744,371 </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">$</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">3,789,634 </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <b><font SIZE="2">LIABILITIES AND STOCKHOLDERS</font></b><font size="2">&#146;</font><b><font size="2">
    EQUITY (DEFICIT)</font></b></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <b><font size="2">Current Liabilities:</font></b></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Accounts payable</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">$</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">604,343 </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">$</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">733,531 </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Accrued liabilities:</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Payroll and related</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">463,788 </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">202,432 </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Deferred revenue</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">276,708 </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">276,667 </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Warranty reserve</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">319,500 </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">6,313 </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Other</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">318,849 </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">53,319 </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Interest on notes</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151; </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">240,279 </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Capital lease short-term portion</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">9,915 </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">8,963 </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <b><font size="2">Total current liabilities</font></b></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">1,993,103 </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">1,521,504 </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <b><font size="2">Long-Term Liabilities:</font></b></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">12% Convertible Promissory Notes, net of $-0- and $345,000
    debt discount</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151; </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">1,380,000 </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Related party 12% Convertible Promissory Notes net of $-0-
    and $60,000 debt discount</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151; </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">240,000 </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">8% Senior Secured Promissory Notes</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151; </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">1,500,000 </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Capital lease long-term portion</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">23,097 </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">33,012 </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <b><font size="2">Total liabilities</font></b></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">2,016,200 </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">4,674,516 </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <b><font size="2">Commitments and contingencies</font></b></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <b><font size="2">Stockholders</font></b><font size="2">&#146;</font><b><font size="2">
    equity (deficit)</font></b></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Preferred stock, $0.00001 par value; 5,000,000 shares
    authorized:</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Series C Preferred stock 300,000 shares designated: -0- and
    10,000 issued and outstanding, respectively. Liquidation preference of $-0-
    and $230,510, respectively.</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Series D Preferred stock 250,000 shares designated: 50,000
    and 235,400 issued and outstanding, respectively. Liquidation preference of
    $542,000 and $2,412,046, respectively.</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">2 </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Series E Preferred stock 350,000 shares designated: 263,250
    and -0- issued and outstanding, respectively. Liquidation preference of
    $2,725,000 and $-0-, respectively.</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">3 </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Common stock, $0.00001 par value; 50,000,000 shares
    authorized; 19,342,657 and 14,351,476 shares issued and outstanding</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">193 </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">144 </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Additional paid-in capital</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">46,095,032 </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">27,255,016 </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Accumulated deficit</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(36,367,057</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(28,140,044</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <b><font size="2">Total stockholders</font></b><font size="2">&#146;</font><b><font size="2">
    equity (deficit)</font></b></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">9,728,171 </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(884,882</font></td>
    <td width="1%" valign="bottom"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <b><font size="2">Total liabilities and stockholders</font></b><font size="2">&#146;</font><b><font size="2">
    equity (deficit)</font></b></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">$</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">11,744,371 </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">$</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">3,789,634 </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p style=" margin-bottom:0pt;text-align:center; margin-top:6pt;"><font size="2">
See accompanying summary of accounting policies and notes to financial
statements.</font><br>
</p>

<p align="center"><font face="Times New Roman" size="2">F-3</font></p>
<hr size="3" color="#C0C0C0">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
<p style=" margin-bottom:0pt;text-align:left; margin-top:6pt"><a href="#TABLE OF CONTENTS"><font size="1">
TABLE OF CONTENTS</font></a></p>
<p style=" margin-bottom:0pt;text-align:center; margin-top:16pt;"><b>
<font size="2">American Technology Corporation</font></b></p>
<p style=" margin-bottom:0pt;text-align:center; margin-top:16pt;">
<font SIZE="2">STATEMENTS OF OPERATIONS</font></p>
<p style=" margin-bottom:0pt; margin-top:0pt;"><font size="2">&nbsp;</font></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><b><font size="1">Years Ended
    September 30,</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11%" colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">2003</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11%" colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">2002</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11%" colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">2001</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <b><font size="2">Revenues:</font></b></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Product sales</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="10%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">1,070,645 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">649,020 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">815,859 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Related party product sales</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">44,077 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Contract and license</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">244,781 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">317,655 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">39,483 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top"></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Total revenues</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">1,315,426 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">1,010,752 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">855,342 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Cost of revenues</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">1,544,077 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">683,844 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">578,276 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top"></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <b><font size="2">Gross profit</font></b></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(228,651</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">326,908 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">277,066 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top"></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <b><font size="2">Operating expenses:</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Selling, general and administrative</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">4,863,711 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3,046,537 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">2,319,690 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Research and development</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">2,493,351 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3,622,063 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3,136,109 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Loss on sales of asset</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(24,513</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(11,500</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Loss on impairment of equipment</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">32,192 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top"></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Total operating expenses</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">7,332,549 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">6,689,292 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">5,455,799 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top"></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Loss from operations</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(7,561,200</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(6,362,384</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(5,178,733</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top"></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <b><font size="2">Other income (expense):</font></b></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Interest income</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">23,293 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">15,596 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">130,314 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Interest expense</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(686,639</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(1,872,544</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Other</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(2,467</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(800</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">2,200 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top"></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Total other income (expense)</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(665,813</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(1,857,748</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">132,514 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top"></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <b><font size="2">Net loss</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(8,227,013</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(8,220,132</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(5,046,219</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Dividend requirements on convertible preferred stock</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">2,409,228 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">282,912 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">120,722 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top"></td>
  </tr>
  <tr style="height:20.8pt">
    <td valign="bottom" style=" height:20.8pt">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <b><font size="2">Net loss available to common stockholders</font></b></td>
    <td width="2%" valign="bottom" style=" height:20.8pt"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style=" height:20.8pt">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="10%" valign="bottom" style=" height:20.8pt">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(10,636,241</font></td>
    <td width="2%" valign="bottom" style=" height:20.8pt"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style=" height:20.8pt">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="9%" valign="bottom" style=" height:20.8pt">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(8,503,044</font></td>
    <td width="2%" valign="bottom" style=" height:20.8pt"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style=" height:20.8pt">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="9%" valign="bottom" style=" height:20.8pt">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(5,166,941</font></td>
    <td width="2%" valign="bottom" style=" height:20.8pt"><font size="2">)</font></td>
  </tr>
  <tr style="height:20.8pt">
    <td valign="top" style=" height:20.8pt"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top" style=" height:20.8pt"><font size="1">&nbsp;</font></td>
    <td valign="top" style=" height:20.8pt">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top" style=" height:20.8pt">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="2%" valign="top" style=" height:20.8pt"><font size="1">&nbsp;</font></td>
    <td valign="top" style=" height:20.8pt">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top" style=" height:20.8pt">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="2%" valign="top" style=" height:20.8pt"><font size="1">&nbsp;</font></td>
    <td valign="top" style=" height:20.8pt">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top" style=" height:20.8pt">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="2%" valign="top" style=" height:20.8pt"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <b><font size="2">Net loss per share of common stock - basic and diluted</font></b></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="10%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(0.67</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(0.60</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(0.38</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <b><font size="2">Average weighted number of common shares outstanding</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">15,857,569 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">14,193,508 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">13,563,101 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p style=" margin-bottom:0pt;text-align:center; margin-top:18pt;">
<font size="2">See accompanying summary of accounting policies and notes to
financial statements.</font></p>

<p align="center"><font face="Times New Roman" size="2">F-4</font></p>
<hr size="3" color="#C0C0C0">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
<p style="page-break-before:always"><a href="#TABLE OF CONTENTS"><font size="1">
TABLE OF CONTENTS</font></a></p>
<p style=" margin-bottom:0pt;text-align:center; margin-top:0pt;"><b>
<font size="2">American Technology Corporation</font></b><br>
<b><font size="2">Statements of Stockholders' Equity (Deficit)</font></b></p>
<p style=" margin-bottom:0pt; margin-top:0pt;"><font size="2">&nbsp;</font></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td colspan="21" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;text-align: left;"><b>
    <font size="1">Years Ended September 30, 2003, 2002 and 2001</font></b></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="15" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan="21" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="15" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="19" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">Convertible Preferred Stock</font></b></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="15" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="19" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="15" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="4" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">Series B</font></b></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="4" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">Series C</font></b></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="4" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">Series D</font></b></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="4" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">Series E</font></b></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="15" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">Common Stock</font></b></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="4" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="4" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="4" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td colspan="4" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="15" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">Shares</font></b></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">Amount</font></b></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="32" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">Shares</font></b></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">Amount</font></b></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">Shares</font></b></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">Amount</font></b></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">Shares</font></b></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">Amount</font></b></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">Shares</font></b></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">Amount</font></b></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">Additional Paid-</font></b><br>
    <b><font size="1">in Capital</font></b></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">Notes</font></b><br>
    <b><font size="1">Receivable</font></b></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="65" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">Accumulated</font></b><br>
    <b><font size="1">Deficit</font></b></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">Total</font></b><br>
    <b><font size="1">Stockholders&#146;</font></b><br>
    <b><font size="1">Equity (Deficit)</font></b></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <b><font size="1">Balance, September 30, 2000</font></b></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">192,260 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">2 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="32" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">10,000 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">13,282,099 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">133 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="67" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">21,731,328 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">(27,895</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">)</font></td>
    <td width="65" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">(14,873,693</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">)</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="71" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">6,829,875 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="1">Issuance of common stock:</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="32" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="67" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="65" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="14" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="71" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
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    <td width="35" valign="bottom" style="background: #EAF9E8">
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    <td width="11" valign="bottom" style="background: #EAF9E8">
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    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="32" valign="bottom" style="background: #EAF9E8">
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    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom" style="background: #EAF9E8">
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    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
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    <td width="44" valign="bottom" style="background: #EAF9E8">
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    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="29" valign="bottom" style="background: #EAF9E8">
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    <td width="10" valign="bottom" style="background: #EAF9E8">
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    <td width="67" valign="bottom" style="background: #EAF9E8">
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    <font size="1">224,997 </font></td>
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    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
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    <td width="65" valign="bottom" style="background: #EAF9E8">
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    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="71" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">225,000 </font></td>
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  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="1">For compensation and services</font></td>
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    <td width="35" valign="bottom">
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    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="27" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="32" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
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    <td width="44" valign="bottom">
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    <font size="1">36,093 </font></td>
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    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="29" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="67" valign="bottom">
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    <font size="1">136,020 </font></td>
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    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="51" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
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    <td width="65" valign="bottom">
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    <font size="1">&#151;</font></td>
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    <td width="14" valign="bottom">
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    <td width="71" valign="bottom">
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    <font size="1">136,020 </font></td>
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  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
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    <td width="35" valign="bottom" style="background: #EAF9E8">
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    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
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    <td width="32" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
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    <td width="44" valign="bottom" style="background: #EAF9E8">
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    <font size="1">70,947 </font></td>
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    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="67" valign="bottom" style="background: #EAF9E8">
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    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="65" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="71" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
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  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="1">Value assigned to 20,000 options granted for services</font></td>
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    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="32" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="67" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">20,924 </font></td>
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    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="65" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="14" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="71" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">20,924 </font></td>
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  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
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    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="32" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="67" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">27,895 </font></td>
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    <td width="65" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="71" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">27,895 </font></td>
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  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
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    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="32" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="67" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">800,000 </font></td>
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    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="65" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="14" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="71" valign="bottom">
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    <font size="1">800,000 </font></td>
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  <tr>
    <td valign="bottom" style="background: #EAF9E8">
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    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="32" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="67" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
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    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="65" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="71" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
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  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="1">Net loss for the year</font></td>
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    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="32" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="67" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="65" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">(5,046,219</font></td>
    <td width="7" valign="bottom"><font size="1">)</font></td>
    <td width="14" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="71" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">(5,046,219</font></td>
    <td width="7" valign="bottom"><font size="1">)</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <b><font size="1">Balance, September 30, 2001</font></b></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">168,860 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">2 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="32" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">10,000 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">13,704,139 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">137 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="67" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">22,913,268 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="65" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">(19,919,912</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">)</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="71" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">2,993,495 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="1">Issuance of common stock:</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="32" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="67" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="65" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="14" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="71" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="1">Upon exercise of stock options</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="32" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">6,250 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="67" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">18,750 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="65" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="71" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">18,750 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="1">For compensation and services</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="32" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">74,129 </font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">1 </font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="67" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="51" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="65" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="14" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="71" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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  <tr>
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    <td width="35" valign="bottom" style="background: #EAF9E8">
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    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
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    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="32" valign="bottom" style="background: #EAF9E8">
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    <td width="19" valign="bottom" style="background: #EAF9E8">
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    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="33" valign="bottom" style="background: #EAF9E8">
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    <td width="12" valign="bottom" style="background: #EAF9E8">
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    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="44" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom" style="background: #EAF9E8">
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    <td width="67" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="65" valign="bottom" style="background: #EAF9E8">
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    <td width="14" valign="bottom" style="background: #EAF9E8">
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    <font size="1">&nbsp;</font></td>
    <td width="71" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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  </tr>
  <tr>
    <td valign="bottom">
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    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="27" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
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    <td width="32" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="67" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">218,803 </font></td>
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    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="65" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="14" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="71" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">218,803 </font></td>
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  <tr>
    <td valign="bottom" style="background: #EAF9E8">
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    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="32" valign="bottom" style="background: #EAF9E8">
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    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="67" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="65" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="71" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
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    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="32" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="67" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">1,225,000 </font></td>
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    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="65" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="14" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="71" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">1,225,000 </font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
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    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="27" valign="bottom" style="background: #EAF9E8">
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    <td width="32" valign="bottom" style="background: #EAF9E8">
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    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="35" valign="bottom" style="background: #EAF9E8">
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    <font size="1">&#151;</font></td>
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    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
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    <td width="12" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
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    <td width="44" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">566,958 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">6 </font></td>
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    <td width="10" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="67" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">(4</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">)</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="65" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="71" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
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  <tr>
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    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
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    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="32" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">235,400 </font></td>
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    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">2 </font></td>
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    <td width="33" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="67" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">2,275,246 </font></td>
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    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="65" valign="bottom">
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    <font size="1">&#151;</font></td>
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    <td width="14" valign="bottom">
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    <font size="1">&nbsp;</font></td>
    <td width="71" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">2,275,248 </font></td>
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  <tr>
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    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
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    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="32" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom" style="background: #EAF9E8">
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    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="67" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="65" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="71" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
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  <tr>
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    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="1">Net loss for the year</font></td>
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    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="32" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="67" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="65" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">(8,220,132</font></td>
    <td width="7" valign="bottom"><font size="1">)</font></td>
    <td width="14" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="71" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">(8,220,132</font></td>
    <td width="7" valign="bottom"><font size="1">)</font></td>
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  <tr>
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    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
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    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
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    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
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    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
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    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
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    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <b><font size="1">Balance, September 30, 2002</font></b></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="32" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">10,000 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">235,400 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">2 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">14,351,476 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">144 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="67" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">27,255,016 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="65" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">(28,140,044</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">)</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="71" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">(884,882</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">)</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="1">Issuance of Series E preferred stock, net of offering costs
    of $176,225</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="32" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">343,250 </font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">3 </font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="67" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">3,256,272 </font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="65" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="14" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="71" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">3,256,275 </font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="1">Issuance of common stock:</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="32" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="67" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="65" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="71" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="1">Upon exercise of stock options</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="32" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">408,951 </font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">4 </font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="67" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">1,614,223 </font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="65" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="14" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="71" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">1,614,227 </font></td>
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  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
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    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="32" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">109,844 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">1 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="67" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">410,815 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="65" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="71" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">410,816 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
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    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="32" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">1,818,180 </font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">18 </font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="67" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">9,454,982 </font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="65" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="14" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="71" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">9,455,000 </font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="1">Conversion of Series C preferred stock</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="32" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">(10,000</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">)</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">41,130 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="67" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="65" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="71" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="1">Conversion of Series D preferred stock</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="32" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">(185,400</font></td>
    <td width="7" valign="bottom"><font size="1">)</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">(2</font></td>
    <td width="7" valign="bottom"><font size="1">)</font></td>
    <td width="33" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">695,266 </font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">7 </font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="67" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">(5</font></td>
    <td width="7" valign="bottom"><font size="1">)</font></td>
    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
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    <td width="65" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="14" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="71" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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  <tr>
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    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
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    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
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    <td width="32" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
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    <td width="33" valign="bottom" style="background: #EAF9E8">
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    <td width="12" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
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    <td width="44" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">253,294 </font></td>
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    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">3 </font></td>
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    <td width="10" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="67" valign="bottom" style="background: #EAF9E8">
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    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">)</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
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    <td width="65" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
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    <td width="14" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="71" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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  <tr>
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    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="1">Exercise of warrants</font></td>
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    <td width="35" valign="bottom">
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    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
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    <td width="32" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
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    <td width="44" valign="bottom">
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    <font size="1">347,000 </font></td>
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    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom">
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    <font size="1">3 </font></td>
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    <td width="10" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="67" valign="bottom">
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    <font size="1">903,718 </font></td>
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    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="51" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
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    <td width="65" valign="bottom">
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    <font size="1">&#151;</font></td>
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    <td width="14" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
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    <td width="71" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">903,721 </font></td>
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  <tr>
    <td valign="bottom" style="background: #EAF9E8">
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    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
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    <td width="32" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom" style="background: #EAF9E8">
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    <font size="1">100,000 </font></td>
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    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">1 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="67" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">584,999 </font></td>
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    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="65" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="71" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">585,000 </font></td>
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  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="1">Conversion of 12% convertible subordinated notes</font></td>
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    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="32" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">1,217,516 </font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">12 </font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="67" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">2,435,020 </font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="65" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="14" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="71" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">2,435,032 </font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="1">Issuance of stock options and warrants for services</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
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    <td width="32" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="67" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">179,995 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="65" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="71" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">179,995 </font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="1">Deemed dividends and accretion on convertible preferred stock
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    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="32" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="67" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="65" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="14" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="71" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="1">Net loss for the year</font></td>
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    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="27" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="32" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="28" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="29" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="67" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="51" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="65" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">(8,227,013</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">)</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="71" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">(8,227,013</font></td>
    <td width="7" valign="bottom" style="background: #EAF9E8"><font size="1">)</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <b><font size="1">Balance, September 30, 2003</font></b></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">$</font></td>
    <td width="27" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="32" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">$</font></td>
    <td width="19" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="35" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">50,000 </font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">$</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="33" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">263,250 </font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">$</font></td>
    <td width="28" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">3 </font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="44" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">19,342,657 </font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">$</font></td>
    <td width="29" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">193 </font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="10" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">$</font></td>
    <td width="67" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">46,095,032 </font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">$</font></td>
    <td width="51" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&#151;</font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="65" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">($36,367,057</font></td>
    <td width="7" valign="bottom"><font size="1">)</font></td>
    <td width="14" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">$</font></td>
    <td width="71" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">9,728,171 </font></td>
    <td width="7" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="7" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p><br>
</p>
<p style=" margin-bottom:0pt;text-align:center; margin-top:18pt;">
<font size="2">See accompanying summary of accounting policies and notes to
financial statements.</font></p>

<p align="center"><font size="2" face="Times New Roman">F-5</font></p>
<hr size="3" color="#C0C0C0">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
<p>&nbsp;</p>

<p style=" margin-bottom:0pt;text-align:left; margin-top:16pt">
<a href="#TABLE OF CONTENTS"><font size="1">TABLE OF CONTENTS</font></a></p>
<p style=" margin-bottom:0pt;text-align:center; margin-top:16pt;"><b>
<font size="2">American Technology Corporation</font></b></p>
<p style=" margin-bottom:0pt;text-align:center; margin-top:10pt;">
<font size="2">STATEMENTS OF CASH FLOWS</font></p>
<p style=" margin-bottom:0pt; margin-top:0pt;"><font size="2">&nbsp;</font></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;text-align: left;"><b>
    <font size="1">Years Ended September 30,</font></b></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="10%" colspan="2" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">2,003</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11%" colspan="2" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">2,002</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11%" colspan="2" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">2001</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <b><font size="2">Increase (Decrease) in Cash </font></b></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <b><font size="2">Operating Activities:</font></b></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Net loss</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="2">$</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(8,227,013</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="2">$</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(8,220,132</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="2">$</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(5,046,219</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Adjustments to reconcile net loss to net cash used in
    operations:</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Depreciation and amortization</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">549,612 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">737,248 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">621,967 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Allowance for doubtful accounts</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">4,809 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">4,139 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Warranty reserves</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">313,187 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Settlement costs paid in fixed assets</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Gain on sale of asset</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(11,500</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Common stock issued for services and compensation</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">410,816 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">304,920 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">136,020 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Options and warrants granted for services</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">179,995 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">517,836 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">20,924 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Common stock issued for legal settlement</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">585,000 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Write-off of note receivable, officer</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">27,895 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Write-off of abandoned patents</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">58,138 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Write down for asset held for sale</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">32,192 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Amortization of debt discount</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">405,000 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">1,620,000 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Changes in assets and liabilities:</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Trade accounts receivable</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(77,485</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">6,098 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">116,190 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Inventories</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(272,063</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">60,132 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(24,540</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Prepaid expenses and other</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(13,719</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">47,030 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">117,320 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Accounts payable</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(12,188 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">411,756 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">87,974 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Accrued liabilities</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">696,680 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">256,996 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">310,077 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Net cash used in operating activities</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(5,457,369</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(4,179,286</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(3,628,253</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="1">&nbsp;</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <b><font size="2">Investing Activities:</font></b></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Purchase of equipment</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(108,246</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(84,080</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(441,616</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Patent costs paid</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(112,007</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(305,418</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(246,674</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Proceeds from sales of equipment</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">11,500 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Net cash used in investing activities</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(220,253</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(377,998</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(688,290</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="1">&nbsp;</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <b><font size="2">Financing Activities:</font></b></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Proceeds from issuance of preferred stock</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">2,432,500 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">2,354,000 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Proceeds from issuance of common stock</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">10,000,000 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Offering costs paid</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(721,225</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(78,752</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Payments on capital lease</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(8,963</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(8,066</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Proceeds from issuance of convertible promissory notes</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">1,225,000 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">800,000 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Proceeds from exercise of common stock warrants</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">221,876 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Proceeds from issuance of senior secured promissory notes</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">500,000 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">1,500,000 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Payments on senior secured promissory notes</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(318,155</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Proceeds from exercise of stock options</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">1,614,227 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">18,750 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">225,000 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Net cash provided by financing activities</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">13,720,260 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">5,010,932 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">1,025,000 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Net increase (decrease) in cash</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">8,042,638 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">453,648 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(3,291,543</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="1">&nbsp;</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Cash, beginning of year</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">1,807,720 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">1,354,072 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">4,645,615 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:8.65pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Cash, end of year</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="2">$</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">9,850,358 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="2">$</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">1,807,720 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="2">$</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">1,354,072 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p style=" margin-bottom:0pt;text-align:center; margin-top:18pt;">
<font size="2">See accompanying summary of accounting policies and notes to
financial statements.</font><br>
</p>

<p align="center"><font face="Times New Roman" size="2">F-6</font></p>
<hr size="3" color="#C0C0C0">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
<p>&nbsp;</p>

<p style=" margin-bottom:0pt;text-align:left; margin-top:18pt">
<a href="#TABLE OF CONTENTS"><font size="1">
TABLE OF CONTENTS</font></a></p>

<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td width="60%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><b><font size="2">American
    Technology Corporation</font></b><br>
    <b><font size="2">Summary of Accounting Policies</font></b></td>
  </tr>
  <tr>
    <td valign="bottom">
    <div style="border:none;border-bottom:solid .05em;padding:0in 0in 1.0pt 0in">
      <div style="border:none;border-bottom:solid .25em;padding:0in 0in 1.0pt 0in">
      </div>
    </div>
    </td>
  </tr>
</table>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font SIZE="2">ORGANIZATION
AND BUSINESS </font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">American
Technology Corporation (the &#147;Company&#148;), a Delaware corporation, is engaged in
design, development and commercialization of sound, acoustic and other
technologies. The Company produces products based on its HyperSonic Sound (HSS),
Long Range Acoustic Device (LRAD), NeoPlanar and Purebass sound technologies.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The Company&#146;s
principal markets for its proprietary sound reproduction technologies and
products are in North America and Europe.</font></p>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font size="2">CONTINUED
EXISTENCE AND MANAGEMENT&#146;S PLAN</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">Other than cash of
$9,850,358 at September 30, 2003, the Company has no other material unused
sources of liquidity at this time. The Company has financed its operations
primarily through the sale of preferred stock, exercise of stock options, sale
of notes, proceeds from the sale of investment securities and margins from
product sales and licensing. Based on the Company&#146;s cash position assuming (a)
currently planned expenditures and level of operations, (b) continuation of
product sales and (c) royalty revenue from licensing agreements, management
believes the Company will have sufficient capital resources for the next twelve
months. Management believes increased product sales will provide additional
operating funds. Management has significant flexibility to adjust the level of
research and development and selling and administrative expenses based on the
availability of resources.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">Management expects
to incur additional operating losses as a result of expenditures for research
and development and marketing costs for sound products. The timing and amounts
of these expenditures and the extent of the Company&#146;s operating losses will
depend on future product sales levels and other factors, some of which are
beyond management&#146;s control. There can be no assurance that revenues from
products and technologies will become sufficient to sustain operations or
achieve profits in the future.</font></p>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font SIZE="2">USE OF
ESTIMATES</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The preparation of
financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and
assumptions (e.g. reserves for accounts receivable and inventory, patent
realizability and warranty reserves) that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could materially differ from those
estimates.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><b><font SIZE="2">FINANCIAL
INSTRUMENTS AND CONCENTRATION OF CREDIT RISK</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The Company&#146;s
financial instruments that are exposed to concentrations of credit risk consist
primarily of cash and trade accounts receivable.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The Company&#146;s cash
is placed in quality money market accounts with major financial institutions.
This investment policy limits the Company&#146;s exposure to concentrations of credit
risk. Such deposit accounts at times may exceed federally insured limits. The
Company has not experienced any losses in such accounts.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">Concentration of
credit risk with respect to the trade accounts receivable are limited due to the
wide variety of customers and markets that comprise the Company&#146;s customer base,
as well as their dispersion across many different geographic areas. The Company
routinely assesses the financial strength of its customers and, as a
consequence, believes that the trade accounts receivable credit risk exposure is
limited. Generally, the Company does not require collateral or other security to
support customer receivables.</font></p>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font SIZE="2">FAIR VALUE OF
FINANCIAL INSTRUMENTS</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The carrying
amounts of cash and cash equivalents, accounts receivables, accounts payable and
accrued liabilities approximate fair values due to the short-term maturities of
these instruments. </font></p>
<p><br>
</p>
<p style="margin-bottom:0pt;text-align:center"><font size="2">F-7</font></p>
<p><br>
</p>
<hr noshade align="center" width="100%" size="2">
<p style="page-break-before:always"><a href="#TABLE OF CONTENTS"><font size="1">
TABLE OF CONTENTS</font></a></p>

<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td width="60%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><b><font size="2">American
    Technology Corporation</font></b><br>
    <b><font size="2">Summary of Accounting Policies</font></b></td>
  </tr>
  <tr>
    <td valign="bottom">
    <div style="border:none;border-bottom:solid .05em;padding:0in 0in 1.0pt 0in">
      <div style="border:none;border-bottom:solid .25em;padding:0in 0in 1.0pt 0in">
      </div>
    </div>
    </td>
  </tr>
</table>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font SIZE="2">INVENTORIES</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">Inventories are
valued at the lower of cost or net realizable value. Cost is determined on a
first-in, first-out basis. The Company writes down its inventory for estimated
obsolescence or unmarketable inventory equal to the difference between cost of
inventory and the estimated market value based upon assumptions about future
demand and market conditions. </font></p>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font SIZE="2">EQUIPMENT AND
DEPRECIATION</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">Equipment is
stated at cost. Depreciation is computed over the estimated useful lives of
three to five years using the straight-line method.</font></p>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font SIZE="2">INTANGIBLES</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">Purchased
technology is carried at cost, and was amortized over three years. Patents are
carried at cost and, when granted are amortized over their estimated useful
lives. The carrying value of patents is periodically reviewed and impairments,
if any, are recognized when the expected future benefit to be derived from an
individual intangible asset is less than its carrying value. </font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">Amortization
expense for purchased technology was $315,636, $420,828 and $420,829 for fiscal
2003, 2002 and 2001, respectively. Amortization expense for patents was $79,544,
$61,730 and $38,405 for fiscal 2003, 2002 and 2001, respectively.</font></p>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font SIZE="2">LEASES</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">Leases entered
into are classified as either capital or operating leases. At the time a capital
lease is entered into, an asset is recorded together with its related long-term
obligation to reflect the purchase and financing. At September 30, 2003 the
Company had recorded $9,915 in short-term and $23,097 in long-term capital lease
obligations.</font></p>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font SIZE="2">GUARANTEES AND
INDEMNIFICATIONS </font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">In November 2002,
the Financial Accounting Standards Board (&#147;FASB&#148;) issued FASB Interpretation
(&#147;FIN&#148;) No. 45 &#147;Guarantor&#146;s Accounting and Disclosure Requirements for
Guarantees, including Indirect Guarantees of Indebtedness of Others -- an
interpretation of FASB Statements No. 5, 57 and 107 and rescission of FIN 34.&#148;
The following is a summary of the Company&#146;s agreements that the Company has
determined are within the scope of FIN No. 45:</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The Company
provides a one year warranty for most of its products. See &#147;Warranty
Liabilities.&#148;</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">Under its bylaws,
the Company has agreed to indemnify its officers and directors for certain
events or occurrences arising as a result of the officer or director&#146;s serving
in such capacity. The term of the indemnification period is for the officer&#146;s or
director&#146;s lifetime. The maximum potential amount of future payments the Company
could be required to make under these indemnification agreements is unlimited.
However, the Company has a directors and officer liability insurance policy that
limits its exposure and enables it to recover a portion of any future amounts
paid. As a result of its insurance policy coverage, the Company believes the
estimated fair value of these indemnification agreements is minimal and has no
liabilities recorded for these agreements as of September 30, 2003.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The Company enters
into indemnification provisions under (i) its agreements with other companies in
its ordinary course of business, typically with business partners, contractors,
customers and landlords and (ii) its agreements with investors. Under these
provisions the Company generally indemnifies and holds harmless the indemnified
party for losses suffered or incurred by the indemnified party as a result of
the Company&#146;s activities or, in some cases, as a result of the indemnified
party&#146;s activities under the agreement. The maximum potential amount of future
payments the Company could be required to make under these indemnification
provisions is unlimited. The Company has not incurred material costs to defend
lawsuits or settle claims related to these indemnification agreements. As a
result, the Company believes the estimated fair value of these agreements is
minimal. Accordingly, the Company has no liabilities recorded for these
agreements as of September 30, 2003.</font></p>
<p><br>
</p>
<p style="margin-bottom:0pt;text-align:center"><font size="2">F-8</font></p>
<p><br>
</p>
<hr noshade align="center" width="100%" size="2">
<p style="page-break-before:always"><a href="#TABLE OF CONTENTS"><font size="1">
TABLE OF CONTENTS</font></a></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td width="60%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><b><font size="2">American
    Technology Corporation</font></b><br>
    <b><font size="2">Summary of Accounting Policies</font></b></td>
  </tr>
  <tr>
    <td valign="bottom">
    <div style="border:none;border-bottom:solid .05em;padding:0in 0in 1.0pt 0in">
      <div style="border:none;border-bottom:solid .25em;padding:0in 0in 1.0pt 0in">
      </div>
    </div>
    </td>
  </tr>
</table>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font SIZE="2">REVENUE
RECOGNITION</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">Product sales are
recognized in the periods that products are shipped to customers, FOB shipping
point, if a signed contract exists, the fee is fixed and determinable,
collection of resulting receivables is probable and there are no remaining
obligations. Revenues from on going per unit license fees are earned based on
units shipped incorporating the Company&#146;s patented proprietary technologies and
are recognized in the period when the ultimate customer accepts the product and collectibility is reasonably assured. Revenues
from up-front license and other fees and annual license fees are recognized
ratably over the specified term of the particular license or agreement. </font>
</p>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font SIZE="2">SHIPPING AND
HANDLING COSTS</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">Amounts paid by
customers for shipping and handling are included in product revenues. Actual
shipping and handling costs are included in product cost of revenues. Shipping
and handling costs were $62,810, $67,850 and $67,977 for the fiscal years
ended September 30, 2003, 2002 and 2001, respectively.</font></p>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font SIZE="2">ADVERTISING</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">Advertising costs
are charged to expenses as incurred. The Company expensed $8,695, $-0- and
$8,305 for the years ended September 2003, 2002 and 2001, respectively.</font></p>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font SIZE="2">RESEARCH AND
DEVELOPMENT COSTS</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">Research and
development costs are expensed as incurred.</font></p>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font SIZE="2">WARRANTY
LIABILITIES</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The Company
warrants its products to be free from defects in materials and workmanship for a
period ranging up to one year from the date of purchase, depending on the
product. The warranty is generally a limited warranty, and in some instances
imposes certain shipping costs on the customer. The Company currently provides
direct warranty service. Some agreements with OEM customers require certain
quantities of product be made available for use as warranty replacements.
International market warranties are generally similar to the U.S. market. </font>
</p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The Company
establishes a warranty reserve based on anticipated warranty claims at the time
product revenue is recognized. Factors affecting warranty reserve levels include
the number of units sold and anticipated cost of warranty repairs and
anticipated rates of warranty claims. The Company evaluates the adequacy of the
provision for warranty costs each reporting period. See Note 9 for additional
information regarding warranties.</font></p>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font SIZE="2">INTEREST
EXPENSE</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">Interest expense
includes interest expense, redemption premiums and non-cash amortization of debt
discount. </font></p>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font SIZE="2">INCOME TAXES</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The Company
accounts for income taxes under Statement of Financial Accounting Standards (&#147;SFAS&#148;)
No. 109. Temporary differences are differences between the tax basis of assets
and liabilities and their reported amounts in the financial statements that will
result in taxable or deductible amounts in future years. A valuation allowance
is recorded by the Company to the extent it is more likely than not that a
deferred tax asset will not be realized.</font></p>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font SIZE="2">COMPREHENSIVE
INCOME</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The Company
follows the provisions of SFAS No. 130, Reporting Comprehensive Income.
Comprehensive income is defined as the change in equity of a business enterprise
during a period from transactions and other events and circumstances from
non-owner sources. There were no differences between net loss and comprehensive
loss for any of the periods presented.</font></p>
<p><br>
</p>
<p style="margin-bottom:0pt;text-align:center"><font size="2">F-9</font></p>
<p><br>
</p>
<hr noshade align="center" width="100%" size="2">
<p style="page-break-before:always"><a href="#TABLE OF CONTENTS"><font size="1">
TABLE OF CONTENTS</font></a></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td width="60%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><b><font size="2">American
    Technology Corporation</font></b><br>
    <b><font size="2">Summary of Accounting Policies</font></b></td>
  </tr>
  <tr>
    <td valign="bottom">
    <div style="border:none;border-bottom:solid .05em;padding:0in 0in 1.0pt 0in">
      <div style="border:none;border-bottom:solid .25em;padding:0in 0in 1.0pt 0in">
      </div>
    </div>
    </td>
  </tr>
</table>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font SIZE="2">IMPAIRMENT OF
LONG-LIVED ASSETS</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">Long-lived assets
and identifiable intangibles held for use are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be
recoverable. If the sum of undiscounted expected future cash flows is less than
the carrying amount of the asset or if changes in facts and circumstances
indicate, an impairment loss is recognized and measured using the asset&#146;s fair
value.</font></p>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font SIZE="2">SEGMENT
INFORMATION</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">In the fourth
quarter of fiscal 2003 the Company organized operations into two segments by the
end-user markets they serve. The Business Products and Licensing Group (Business
Group) licenses and markets HSS, NeoPlanar and Purebass speakers to companies
that employ audio in consumer, commercial and professional applications. The
Government and Force Protection Systems Group (Government Group) markets LRAD,
NeoPlanar and HSS products to government and military customers and to the
expanding force protection market. See Note 14.</font></p>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font SIZE="2">NET LOSS PER
SHARE</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">Basic earnings
(loss) per share includes no dilution and is computed by dividing income (loss)
available to common stockholders, after deduction for cumulative imputed and
accredited dividends, by the weighted average number of common shares
outstanding for the period. Diluted earnings (loss) per share reflects the
potential dilution of securities that could share in the earnings of an entity.
The Company&#146;s losses for the years presented cause the inclusion of potential
common stock instruments outstanding to be antidilutive. Stock options, warrants
and convertible preferred stock exercisable into 4,999,522 shares of common
stock were outstanding at September 30, 2003, stock options, warrants and
convertible preferred stock and notes exercisable into </font><font size="1">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font size="2">5,462,166 shares of common stock were outstanding at
September 30, 2002 and stock options, warrants and convertible preferred stock
exercisable into 3,453,500 shares of common stock were outstanding at September
30, 2001. These securities were not included in the computation of diluted
earnings (loss) per share because of the losses but could potentially dilute
earnings (loss) per share in future periods.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">Net loss available
to common stockholders was increased during fiscal 2003 and 2002 in computing
net loss per share by imputed deemed dividends based on the value of warrants
issued in connection with convertible preferred stock (see Note 6). The net loss
available to common stockholders was also increased in fiscal 2002 and 2003 by
an additional deemed dividend computed from a discount provision in convertible
preferred stock (see Note 6). Such imputed deemed dividends are not included in
the Company&#146;s stockholders&#146; equity as the Company has an accumulated deficit.
Amounts are included in net loss available to common stockholders. The imputed
deemed dividends are not contractual obligations of the Company to pay such
imputed dividends.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The provisions of
each of the Company&#146;s series of preferred stock provided for a 6% per annum
accretion in the conversion value (similar to a dividend). These amounts
increase the net loss available to common stockholders. Net loss available to
common stockholders is computed as follows:</font></p>
<p style=" margin-bottom:0pt; margin-top:0pt;"><font size="2">&nbsp;</font></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;text-align: left;"><b>
    <font size="1">Years Ended September 30,</font></b></td>
    <td width="4%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="12%" colspan="2" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">2003</font></b></td>
    <td width="3%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="10%" colspan="2" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">2002</font></b></td>
    <td width="3%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="10%" colspan="2" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">2001</font></b></td>
    <td width="2%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="4%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-bottom:0pt;margin-top:0in;">
    <font size="2">Net loss</font></td>
    <td width="4%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">$</font></td>
    <td width="10%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(8,227,013</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">$</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(8,220,132</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">$</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(5,046,219</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-bottom:0pt;margin-top:0in;">
    <font size="2">Imputed deemed dividends on Series D and E warrants issued
    with preferrd stock [note 6]</font></td>
    <td width="4%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(538,070</font></td>
    <td width="3%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(91,492</font></td>
    <td width="3%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-bottom:0pt;margin-top:0in;">
    <font size="2">Imputed deemed dividends on Series D and E preferred stock
    [note 6]</font></td>
    <td width="4%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(1,683,500</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(104,444</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-bottom:0pt;margin-top:0in;">
    <font size="2">Accretion on preferred stock at 6% stated rate:</font></td>
    <td width="4%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="3%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="3%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Series B preferred stock</font></td>
    <td width="4%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="3%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(16,932</font></td>
    <td width="3%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(108,722</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Series C preferred stock</font></td>
    <td width="4%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(6,000</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(12,000</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(12,000</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Series D preferred stock</font></td>
    <td width="4%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(65,844</font></td>
    <td width="3%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(58,044</font></td>
    <td width="3%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0in;margin-left:17.3pt;margin-bottom:.0001pt;text-indent:-8.65pt;">
    <font size="2">Series E preferred stock</font></td>
    <td width="4%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(115,814</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="4%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-bottom:0pt;margin-top:0in;">
    <font size="2">Net loss available to common stockholders</font></td>
    <td width="4%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">$</font></td>
    <td width="10%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(10,636,241</font></td>
    <td width="3%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">$</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(8,503,044</font></td>
    <td width="3%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">$</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-bottom:0pt;margin-top:0in;">
    <font size="2">(5,166,941</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="4%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;</p>
<p style="margin-bottom:0pt;text-align:center"><font size="2">F-10</font></p>
<p><br>
</p>
<hr noshade align="center" width="100%" size="2">
<p style="page-break-before:always"><a href="#TABLE OF CONTENTS"><font size="1">
TABLE OF CONTENTS</font></a></p>

<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td width="60%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><b><font size="2">American
    Technology Corporation</font></b><br>
    <b><font size="2">Summary of Accounting Policies</font></b></td>
  </tr>
  <tr>
    <td valign="bottom">
    <div style="border:none;border-bottom:solid .05em;padding:0in 0in 1.0pt 0in">
      <div style="border:none;border-bottom:solid .25em;padding:0in 0in 1.0pt 0in">
      </div>
    </div>
    </td>
  </tr>
</table>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font SIZE="2">STOCK-BASED
COMPENSATION</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The Company has
adopted SFAS No. 123, &#147;Accounting for Stock-Based Compensation,&#148; for disclosure
purposes. Under SFAS No. 123, the Company measures compensation expense for its
stock-based employee compensation plan using the intrinsic value method
prescribed in Accounting Principles Board (&#147;APB&#148;) No. 25, &#147;Accounting for Stock
Issued to Employees&#148; and its related interpretations. The Company provides pro
forma disclosure of the effect on net income or loss as if the fair value based
method prescribed in SFAS No. 123 has been applied in measuring compensation
expense. </font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The Company
estimates the fair value of each stock award at the grant date by using the
Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 2003, 2002 and 2001, respectively: dividend yield
of zero percent for all years; expected volatility of 68 to 84&nbsp;percent in 2003,
expected volatility of 63&nbsp;percent in 2002 and expected volatility of 89 percent
in 2001; risk-free interest rates of 4.00 to 6.72&nbsp;percent; and expected lives of
2.21 to 5&nbsp;years.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">For purposes of
pro forma disclosures, the estimated fair value of the options is amortized to
expense over the options&#146; vesting period. The Company&#146;s pro forma information
follows:</font></p>
<p style=" margin-bottom:0pt; margin-top:0pt;"><font size="2">&nbsp;</font></p>
<table width="88%" border="0" cellspacing="0" cellpadding="0" style="margin-left:25.9pt; border-collapse:collapse">
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><b><font size="1">Years Ended
    September 30,</font></b></td>
    <td width="4%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="13%" colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">2003</font></b></td>
    <td width="3%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="12%" colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">2002</font></b></td>
    <td width="3%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="12%" colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">2001</font></b></td>
    <td width="2%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="4%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">Net loss available to common shareholders</font></td>
    <td width="4%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="11%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(10,636,241</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="11%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(8,503,044</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="10%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(5,166,941</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Plus: Stock-based employee compensation expense included in
    reported net loss</font></td>
    <td width="4%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="3%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="3%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151; </font></td>
    <td width="2%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Less:Total stock-based employee compensation expense
    determined using fair value based method</font></td>
    <td width="4%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(972,896</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(933,704</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(693,270</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="4%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Pro forma net loss available to common stockholders</font></td>
    <td width="4%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="11%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(11,609,137</font></td>
    <td width="3%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="11%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(9,436,748</font></td>
    <td width="3%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="10%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(5,860,211</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="4%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Net loss per common share - basic and diluted - pro forma</font></td>
    <td width="4%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="11%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(0.73</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="11%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(0.66</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="10%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(0.43</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="4%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Net loss per common share - basic and diluted - as reported</font></td>
    <td width="4%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="11%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(0.67</font></td>
    <td width="3%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="11%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(0.60</font></td>
    <td width="3%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="10%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(0.38</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="4%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font SIZE="2">COMMON STOCK
ISSUED FOR SERVICES</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The Company
records compensation expense for common stock issued for services based on the
estimated fair market value. Estimated fair market value is determined based on
the quoted stock price on the day of issuance.</font></p>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font SIZE="2">STATEMENT OF
CASH FLOWS</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">For purposes of
the statement of cash flows, the Company considers all highly liquid investments
purchased with an original maturity of three months or less to be cash
equivalents.</font></p>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font SIZE="2">RECENT
ACCOUNTING PRONOUNCEMENTS</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">In October 2001,
the SFAS issued SFAS No. 144, &#147;Accounting for the Impairment or Disposal of
Long-Lived Assets&#148;. SFAS 144 requires that those long-lived assets be measured
at the lower of carrying amount or fair value, less cost to sell, whether
reported in continuing operations or in discontinued operations. Therefore,
discontinued operations will no longer be measured at net realizable value or
include amounts for operating losses that have not yet occurred. SFAS 144 is
effective for financial statements issued for fiscal years beginning after
December 15, 2001 and, generally, is to be applied prospectively. The adoption
of this statement did not have a material impact on the Company&#146;s financial
statements.</font></p>
<p><br>
</p>
<p style="margin-bottom:0pt;text-align:center"><font size="2">F-11</font></p>
<p><br>
</p>
<hr noshade align="center" width="100%" size="2">
<p style="page-break-before:always"><a href="#TABLE OF CONTENTS"><font size="1">
TABLE OF CONTENTS</font></a></p>

<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td width="60%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><b><font size="2">American
    Technology Corporation</font></b><br>
    <b><font size="2">Summary of Accounting Policies</font></b></td>
  </tr>
  <tr>
    <td valign="bottom">
    <div style="border:none;border-bottom:solid .05em;padding:0in 0in 1.0pt 0in">
      <div style="border:none;border-bottom:solid .25em;padding:0in 0in 1.0pt 0in">
      </div>
    </div>
    </td>
  </tr>
</table>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">In April 2002, the
FASB issued SFAS No. 145, Rescission of FASB No. 4, 44 and 64, Amendment of FASB
No. 13, and Technical Corrections. SFAS rescinds FASB No. 4 Reporting Gains and
Losses from Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements.
This statement also rescinds SFAS No. 44 Accounting for Intangible Assets of
Motor Carriers and amends SFAS No. 13, Accounting for Leases, to eliminate an
inconsistency between the required accounting for sale-leaseback transactions
and the required accounting for certain lease modifications that have economic
effects that are similar to sale-leaseback transactions. This Statement also
amends other existing authoritative pronouncements to make various technical
corrections, clarify meanings, or describe their applicability under changed
conditions. This statement is effective for fiscal years beginning after May 15,
2002. The adoption of this statement did not have a material impact on the
Company&#146;s financial statements.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">In June 2002, the
FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal
Activities. SFAS No. 146 addresses accounting and reporting for costs associated
with exit or disposal activities and nullifies Emerging Issues Task Force Issue
No. 94-3, Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (Including Certain Costs Incurred in a
Restructuring). SFAS No. 146 requires that a liability for a cost associated
with an exit or disposal activity be recognized and measured initially at fair
value when the liability is incurred. SFAS No. 146 is effective for exit or
disposal activities that are initiated after December 31, 2002, with early
application encouraged. The adoption of this statement did not have a material
impact on the Company&#146;s financial statements.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">In December 2002,
FASB issued SFAS No. 148</font><i><font size="2">, </font></i><font size="2">
&#147;Accounting for Stock&#150;Based Compensation &#151; Transition and Disclosure&#151;an
Amendment of FASB Statement No. 123.&#148; This statement amends SFAS No. 123,
&#147;Accounting for Stock-Based Compensation&#148;, to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, this statement amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The Company adopted the disclosure requirements effective October 1,
2002, in its financial statements.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">In May 2003, FASB
issued SFAS No. 150, &#147;Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity.&#148; SFAS No. 150 provides guidance
on how an entity classifies and measures certain financial instruments with
characteristics of both liabilities and equity. Many of these instruments were
previously classified as equity. This statement is effective for financial
instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after June 15,
2003. The statement requires cumulative effect transition for financial
instruments existing at the adoption date. The adoption of this statement did
not have a material impact on the Company&#146;s financial statements.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">In November 2002,
FASB issued FASB Interpretation No. 45, &#147;Guarantor&#146;s Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others&#148; (&#147;FIN 45&#148;). FIN 45 clarifies that a guarantor is required to recognize,
at the inception of a guarantee, a liability for the fair value of the
obligation undertaken in issuing the guarantee. The initial recognition and
initial measurement provisions of FIN 45 are applicable on a prospective basis
to guarantees issued or modified after December 31, 2002. The disclosure
requirements of FIN 45 are applicable for financial statements of interim
periods ending after December 15, 2002. The Company adopted the disclosure
requirements of FIN 45 in the 1<sup>st</sup> quarter of 2003 and has included
the new disclosure requirements in the Notes to the Financial Statements.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;">
<font size="2">In January 2003, FASB
issued FASB Interpretation No. 46, &#147;Consolidation of Variable Interest Entities&#148;
(&#147;FIN 46&#148;).&nbsp; This interpretation clarifies the application of Accounting
Research Bulletin No. 51, &#147;Consolidated Financial Statements,&#148; relating to
consolidation of certain entities.&nbsp; FIN 46 will require identification of the
Company&#146;s participation in variable interests entities (&#147;VIEs&#148;), which are
defined as entities with a level of invested equity that is not sufficient to
fund future activities to permit them to operate on a stand-alone basis, or
whose equity holders lack certain characteristics of a controlling financial
interest.&nbsp; For entities identified as VIEs, FIN 46 sets forth a model to
evaluate potential consolidation based on an assessment of which party to the
VIE, if any, bears a majority of the exposure to its expected losses, or stands
to gain from a majority of its expected returns.&nbsp; FIN 46 also sets forth certain
disclosures regarding interests in VIEs that are deemed significant, even if
consolidation is not required.&nbsp; The adoption of FIN 46 did not have a material
impact on the Company&#146;s financial position, results of operations or cash flows.</font></p>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font SIZE="2">
RECLASSIFICATIONS</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">Where necessary,
prior year&#146;s information has been reclassified to conform with the fiscal 2003
statement presentation.</font></p>
<p><br>
</p>
<p style="margin-bottom:0pt;text-align:center"><font size="2">F-12</font></p>
<p><br>
</p>
<hr noshade align="center" width="100%" size="2">
<p style="page-break-before:always"><a href="#TABLE OF CONTENTS"><font size="1">
TABLE OF CONTENTS</font></a></p>

<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td width="60%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><b><font size="2">American
    Technology Corporation</font></b><br>
    <b><font size="2">Notes to the Financial Statements</font></b></td>
  </tr>
  <tr>
    <td valign="bottom">
    <div style="border:none;border-bottom:solid .05em;padding:0in 0in 1.0pt 0in">
      <div style="border:none;border-bottom:solid .25em;padding:0in 0in 1.0pt 0in">
      </div>
    </div>
    </td>
  </tr>
</table>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font size="2">1. INVENTORIES</font></b></p>
<p style=" margin-bottom:0pt; margin-top:0pt;"><font size="2">&nbsp;</font></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse: collapse" bordercolor="#111111">
  <tr>
    <td valign="bottom" width="534" style="border-bottom-style: solid; border-bottom-width:1">

    <font size="2">Inventories consisted of the following at September 30,</font></td>
    <td width="11" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">

    <font size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom" width="64" style="border-bottom-style: solid; border-bottom-width: 1">

    <p align="center"><font size="2">2003</font></td>
    <td width="5" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">

    <font size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom" width="59" style="border-bottom-style: solid; border-bottom-width: 1">

    <p align="center"><font size="2">2002</font></td>
    <td width="6" valign="bottom">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8; " width="534">
    <p style="margin-top: 10">
    <font size="2">Finished goods</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8; ">
    <p style="margin-top: 10">
    <font size="2">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8; " align="right">
    <p style="margin-top: 10">
    <font size="2">$</font></td>
    <td width="55" valign="bottom" style="background: #EAF9E8; ">
    <p align="right" style="margin-top: 10"><font size="2">13,690&nbsp;&nbsp; </font></td>
    <td width="5" valign="bottom" style="background: #EAF9E8; ">
    <p style="margin-top: 10">
    <font size="2">&nbsp;</font></td>
    <td width="8" valign="bottom" style="background: #EAF9E8; " align="right">
    <p style="margin-top: 10">
    <font size="2">$</font></td>
    <td width="51" valign="bottom" style="background: #EAF9E8; ">
    <p align="right" style="margin-top: 10"><font size="2">78,361&nbsp;</font></td>
    <td width="6" valign="bottom" style="background: #EAF9E8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" width="534">
    <font size="2">Work in process</font></td>
    <td width="11" valign="bottom">
    <font size="2">&nbsp;</font></td>
    <td width="9" valign="bottom" align="right">
    <font size="2">&nbsp;</font></td>
    <td width="55" valign="bottom">
    <p align="right"><font size="2">182,638&nbsp;&nbsp; </font></td>
    <td width="5" valign="bottom">
    <font size="2">&nbsp;</font></td>
    <td width="8" valign="bottom" align="right">
    <font size="2">&nbsp;</font></td>
    <td width="51" valign="bottom">
    <p align="right">&#151;&nbsp;</td>
    <td width="6" valign="bottom">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8; border-bottom-style:solid; border-bottom-width:1" width="534">

    <font size="2">Raw materials</font></td>
    <td width="11" valign="bottom" bgcolor="#EAF9E8" style="border-bottom-style: solid; border-bottom-width: 1">
    <font size="2">&nbsp;</font></td>
    <td width="9" valign="bottom" bgcolor="#EAF9E8" style="border-bottom-style: solid; border-bottom-width: 1" align="right">
    <font size="2">&nbsp;</font></td>
    <td width="55" valign="bottom" bgcolor="#EAF9E8" style="border-bottom-style: solid; border-bottom-width: 1">
    <p align="right"><font size="2">232,616&nbsp;&nbsp; </font></td>
    <td width="5" valign="bottom" style="background: #EAF9E8; border-bottom-style:solid; border-bottom-width:1">

    <font size="2">&nbsp;</font></td>
    <td width="8" valign="bottom" bgcolor="#EAF9E8" style="border-bottom-style: solid; border-bottom-width: 1" align="right">
    <font size="2">&nbsp;</font></td>
    <td width="51" valign="bottom" bgcolor="#EAF9E8" style="border-bottom-style: solid; border-bottom-width: 1">
    <p align="right"><font size="2">78,520&nbsp;</font></td>
    <td width="6" valign="bottom" style="background: #EAF9E8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" width="534" style="border-top-style: solid; border-top-width: 1">
    <font size="2">&nbsp;</font></td>
    <td width="11" valign="bottom" style="border-top-style: solid; border-top-width: 1">
    <font size="2">&nbsp;</font></td>
    <td width="9" valign="bottom" style="border-top-style: solid; border-top-width: 1" align="right">
    <font size="2">&nbsp;</font></td>
    <td width="55" valign="bottom" style="border-top-style: solid; border-top-width: 1">
    <p align="right"><font size="2">428,944&nbsp;</font></td>
    <td width="5" valign="bottom" style="border-top-style: solid; border-top-width: 1">
    <font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td width="8" valign="bottom" style="border-top-style: solid; border-top-width: 1" align="right">
    <font size="2">&nbsp;</font></td>
    <td width="51" valign="bottom" style="border-top-style: solid; border-top-width: 1">
    <p align="right"><font size="2">156,881&nbsp;</font></td>
    <td width="6" valign="bottom">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" width="534" bgcolor="#EAF9E8" style="border-bottom-style: solid; border-bottom-width: 1">
    <font size="2">Reserve for obsolescence</font></td>
    <td width="11" valign="bottom" bgcolor="#EAF9E8" style="border-bottom-style: solid; border-bottom-width: 1">
    <font size="2">&nbsp;</font></td>
    <td width="9" valign="bottom" bgcolor="#EAF9E8" style="border-bottom-style: solid; border-bottom-width: 1" align="right">
    <font size="2">&nbsp;</font></td>
    <td width="55" valign="bottom" bgcolor="#EAF9E8" style="border-bottom-style: solid; border-bottom-width: 1">
    <p align="right">
    <font size="2">(20,000)</font></td>
    <td width="5" valign="bottom" style="background: #EAF9E8; border-bottom-style:solid; border-bottom-width:1">
<font size="2">&nbsp;</font></td>
    <td width="8" valign="bottom" bgcolor="#EAF9E8" style="border-bottom-style: solid; border-bottom-width: 1" align="right" >
    <font size="2">&nbsp;</font></td>
    <td width="51" valign="bottom" bgcolor="#EAF9E8" style="border-bottom-style: solid; border-bottom-width: 1">
    <p align="right"><font size="2">(20,000)</font></td>
    <td width="6" valign="bottom" style="background: #EAF9E8"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" width="534" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double">
    <font size="2">&nbsp;</font></td>
    <td width="11" valign="bottom" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double">
    <font size="2">&nbsp;</font></td>
    <td width="9" valign="bottom" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double" align="right">
    <font size="2">$</font></td>
    <td width="55" valign="bottom" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double">
    <p align="right"><font size="2">408,944&nbsp;</font></td>
    <td width="5" valign="bottom" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double">

    <font size="2">&nbsp;</font></td>
    <td width="8" valign="bottom" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double" align="right">
    <font size="2">$</font></td>
    <td width="51" valign="bottom" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double">
    <p align="right"><font size="2">136,881&nbsp;</font></td>
    <td width="6" valign="bottom">
    <font size="2">&nbsp;</font></td>
  </tr>
  </table>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font size="2">2. EQUIPMENT</font></b></p>
<p style=" margin-bottom:0pt; margin-top:0pt;"><font size="2">&nbsp;</font></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse: collapse" bordercolor="#111111">
  <tr>
    <td valign="bottom" width="534" style="border-bottom-style: solid; border-bottom-width:1">

    <font size="2">Equipment consisted of the following at September 30,</font></td>
    <td width="11" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">

    <font size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom" width="64" style="border-bottom-style: solid; border-bottom-width: 1">

    <p align="center"><font size="2">2003</font></td>
    <td width="5" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">

    <font size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom" width="59" style="border-bottom-style: solid; border-bottom-width: 1">

    <p align="center"><font size="2">2002</font></td>
    <td width="6" valign="bottom">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8; " width="534">
    <font size="2">Machinery and equipment</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8; ">
    <font size="2">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8; " align="right">
    <font size="2">$</font></td>
    <td width="55" valign="bottom" style="background: #EAF9E8; ">
    <p align="right"><font size="2">571,927&nbsp;&nbsp; </font></td>
    <td width="5" valign="bottom" style="background: #EAF9E8; ">
    <font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td width="8" valign="bottom" style="background: #EAF9E8; " align="right">
    <font size="2">$</font></td>
    <td width="51" valign="bottom" style="background: #EAF9E8; ">
    <p align="right"><font size="2">702,219&nbsp;</font></td>
    <td width="6" valign="bottom" style="background: #EAF9E8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" width="534">
    <font size="2">Office furniture and equipment</font></td>
    <td width="11" valign="bottom">
    <font size="2">&nbsp;</font></td>
    <td width="9" valign="bottom" align="right">
    <font size="2">&nbsp;</font></td>
    <td width="55" valign="bottom">
    <p align="right"><font size="2">480,536&nbsp;&nbsp; </font></td>
    <td width="5" valign="bottom">
    <font size="2">&nbsp;</font></td>
    <td width="8" valign="bottom" align="right">
    <font size="2">&nbsp;</font></td>
    <td width="51" valign="bottom">
    <p align="right"><font size="2">365,611&nbsp;</font></td>
    <td width="6" valign="bottom">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8; border-bottom-style:solid; border-bottom-width:1" width="534">

    <font size="2">Leasehold improvements</font></td>
    <td width="11" valign="bottom" bgcolor="#EAF9E8" style="border-bottom-style: solid; border-bottom-width: 1">
    <font size="2">&nbsp;</font></td>
    <td width="9" valign="bottom" bgcolor="#EAF9E8" style="border-bottom-style: solid; border-bottom-width: 1" align="right">
    <font size="2">&nbsp;</font></td>
    <td width="55" valign="bottom" bgcolor="#EAF9E8" style="border-bottom-style: solid; border-bottom-width: 1">
    <p align="right"><font size="2">198,491&nbsp;&nbsp; </font></td>
    <td width="5" valign="bottom" style="background: #EAF9E8; border-bottom-style:solid; border-bottom-width:1">

    <font size="2">&nbsp;</font></td>
    <td width="8" valign="bottom" bgcolor="#EAF9E8" style="border-bottom-style: solid; border-bottom-width: 1" align="right">
    <font size="2">&nbsp;</font></td>
    <td width="51" valign="bottom" bgcolor="#EAF9E8" style="border-bottom-style: solid; border-bottom-width: 1">
    <p align="right"><font size="2">198,491&nbsp;</font></td>
    <td width="6" valign="bottom" style="background: #EAF9E8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" width="534" style="border-top-style: solid; border-top-width: 1">
    <font size="2">&nbsp;</font></td>
    <td width="11" valign="bottom" style="border-top-style: solid; border-top-width: 1">
    <font size="2">&nbsp;</font></td>
    <td width="9" valign="bottom" style="border-top-style: solid; border-top-width: 1" align="right">
    <font size="2">&nbsp;</font></td>
    <td width="55" valign="bottom" style="border-top-style: solid; border-top-width: 1">
    <p align="right"><font size="2">1,250,955&nbsp;</font></td>
    <td width="5" valign="bottom" style="border-top-style: solid; border-top-width: 1">
    <font size="2">&nbsp;</font></td>
    <td width="8" valign="bottom" style="border-top-style: solid; border-top-width: 1" align="right">
    <font size="2">&nbsp;</font></td>
    <td width="51" valign="bottom" style="border-top-style: solid; border-top-width: 1">
    <p align="right"><font size="2">1,266,321&nbsp;</font></td>
    <td width="6" valign="bottom">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" width="534" bgcolor="#EAF9E8" style="border-bottom-style: solid; border-bottom-width: 1">
    <font size="2">Accumulated depreciation</font></td>
    <td width="11" valign="bottom" bgcolor="#EAF9E8" style="border-bottom-style: solid; border-bottom-width: 1">
    <font size="2">&nbsp;</font></td>
    <td width="9" valign="bottom" bgcolor="#EAF9E8" style="border-bottom-style: solid; border-bottom-width: 1" align="right">
    <font size="2">&nbsp;</font></td>
    <td width="55" valign="bottom" bgcolor="#EAF9E8" style="border-bottom-style: solid; border-bottom-width: 1">
    <p align="right">
    <font size="2">(1,050,692)</font></td>
    <td width="5" valign="bottom" style="background: #EAF9E8; border-bottom-style:solid; border-bottom-width:1">
<font size="2">&nbsp;</font></td>
    <td width="8" valign="bottom" bgcolor="#EAF9E8" style="border-bottom-style: solid; border-bottom-width: 1" align="right" >
    <font size="2">&nbsp;</font></td>
    <td width="51" valign="bottom" bgcolor="#EAF9E8" style="border-bottom-style: solid; border-bottom-width: 1">
    <p align="right"><font size="2">(902,873)</font></td>
    <td width="6" valign="bottom" style="background: #EAF9E8"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" width="534" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double">
    <font size="2">&nbsp;Net equipment</font></td>
    <td width="11" valign="bottom" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double">
    <font size="2">&nbsp;</font></td>
    <td width="9" valign="bottom" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double" align="right">
    <font size="2">$</font></td>
    <td width="55" valign="bottom" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double">
    <p align="right"><font size="2">200,262&nbsp;</font></td>
    <td width="5" valign="bottom" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double">

    <font size="2">&nbsp;</font></td>
    <td width="8" valign="bottom" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double" align="right">
    <font size="2">$</font></td>
    <td width="51" valign="bottom" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double">
    <p align="right"><font size="2">363,448&nbsp;</font></td>
    <td width="6" valign="bottom">
    <font size="2">&nbsp;</font></td>
  </tr>
  </table>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">Depreciation
expense was $157,404, $254,690 and $162,733 for the years ended September 30,
2003, 2002 and 2001, respectively.</font></p>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font size="2">3. INTANGIBLES</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><u><font size="2">Purchased
Technology</font></u></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">In April 2000, the
Company acquired all rights to certain loudspeaker technology. The purchase
price consisted of $300,000 cash plus 200,000 shares of common stock. The
200,000 shares of common stock were issued in June 2000 and were valued at
$962,500. The Company was obligated to pay up to an additional 159,843 shares of
common stock contingent upon the achievement of certain performance milestones
relating to gross revenues from the purchased technology. During fiscal 2002 the
Company issued 50,000 shares of the contingent common stock recording
compensation expense of $210,000 at an estimated fair market value of $4.20 per
share and during fiscal 2003 issued the balance of 109,844 shares of the
contingent common stock recording compensation expense of $410,816. Two
principals involved with the purchased technology were employed under three year
agreements which terminated on February 15, 2003. </font></p>
<p style=" margin-bottom:0pt; margin-top:0pt;">&nbsp;</p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse: collapse" bordercolor="#111111">
  <tr>
    <td valign="bottom" width="534" style="border-bottom-style: solid; border-bottom-width:1">

    <font size="2">Purchased technology consisted of the following at September 30,</font></td>
    <td width="11" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">

    <font size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom" width="64" style="border-bottom-style: solid; border-bottom-width: 1">

    <p align="center"><font size="2">2003</font></td>
    <td width="5" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">

    <font size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom" width="59" style="border-bottom-style: solid; border-bottom-width: 1">

    <p align="center"><font size="2">2002</font></td>
    <td width="6" valign="bottom">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8; " width="534">
    <p style="margin-top: 10">
    <font size="2">Cost</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8; ">
    <p style="margin-top: 10">
    <font size="2">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8; " align="right">
    <p style="margin-top: 10">
    <font size="2">$</font></td>
    <td width="55" valign="bottom" style="background: #EAF9E8; ">
    <p align="right" style="margin-top: 10"><font size="2">1,262,500&nbsp;</font></td>
    <td width="5" valign="bottom" style="background: #EAF9E8; ">
    <p style="margin-top: 10">
    <font size="2">&nbsp;</font></td>
    <td width="8" valign="bottom" style="background: #EAF9E8; " align="right">
    <p style="margin-top: 10">
    <font size="2">$</font></td>
    <td width="51" valign="bottom" style="background: #EAF9E8; ">
    <p align="right" style="margin-top: 10"><font size="2">1,262,500&nbsp;</font></td>
    <td width="6" valign="bottom" style="background: #EAF9E8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #FFFFFF; border-bottom-style:solid; border-bottom-width:1" width="534">

    <font size="2">Accumulated depreciation</font></td>
    <td width="11" valign="bottom" bgcolor="#FFFFFF" style="border-bottom-style: solid; border-bottom-width: 1">
    <font size="2">&nbsp;</font></td>
    <td width="9" valign="bottom" bgcolor="#FFFFFF" style="border-bottom-style: solid; border-bottom-width: 1" align="right">
    <font size="2">&nbsp;</font></td>
    <td width="55" valign="bottom" bgcolor="#FFFFFF" style="border-bottom-style: solid; border-bottom-width: 1">
    <p align="right"><font size="2">(1,262,500)</font></td>
    <td width="5" valign="bottom" style="background: #FFFFFF; border-bottom-style:solid; border-bottom-width:1">

    <font size="2">&nbsp;</font></td>
    <td width="8" valign="bottom" bgcolor="#FFFFFF" style="border-bottom-style: solid; border-bottom-width: 1" align="right">
    <font size="2">&nbsp;</font></td>
    <td width="51" valign="bottom" bgcolor="#FFFFFF" style="border-bottom-style: solid; border-bottom-width: 1">
    <p align="right"><font size="2">(946,864)</font></td>
    <td width="6" valign="bottom" style="background: #FFFFFF; ">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" width="534" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double" bgcolor="#EAF9E8">
    <font size="2">&nbsp;Net purchased technology</font></td>
    <td width="11" valign="bottom" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double" bgcolor="#EAF9E8">
    <font size="2">&nbsp;</font></td>
    <td width="9" valign="bottom" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double" align="right" bgcolor="#EAF9E8">
    <font size="2">$</font></td>
    <td width="55" valign="bottom" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double" bgcolor="#EAF9E8">
    <p align="right"><font size="2">&#151;&nbsp;</font></td>
    <td width="5" valign="bottom" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double" bgcolor="#EAF9E8">

    <font size="2">&nbsp;</font></td>
    <td width="8" valign="bottom" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double" align="right" bgcolor="#EAF9E8">
    <font size="2">$</font></td>
    <td width="51" valign="bottom" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double" bgcolor="#EAF9E8">
    <p align="right"><font size="2">315,636&nbsp;</font></td>
    <td width="6" valign="bottom" bgcolor="#EAF9E8">
    <font size="2">&nbsp;</font></td>
  </tr>
  </table>
<p style=" margin-bottom:0pt; margin-top:0pt;">&nbsp;</p>
<p style=" margin-bottom:0pt; margin-top:0pt;"><u><font size="2">Patents</font></u></p>
<p style=" margin-bottom:0pt; margin-top:0pt;">&nbsp;</p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse: collapse" bordercolor="#111111">
  <tr>
    <td valign="bottom" width="534" style="border-bottom-style: solid; border-bottom-width:1">

    <font size="2">Patents consisted of the following at September 30,</font></td>
    <td width="11" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">

    <font size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom" width="64" style="border-bottom-style: solid; border-bottom-width: 1">

    <p align="center"><font size="2">2003</font></td>
    <td width="5" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">

    <font size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom" width="59" style="border-bottom-style: solid; border-bottom-width: 1">

    <p align="center"><font size="2">2002</font></td>
    <td width="6" valign="bottom">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8; " width="534">
    <p style="margin-top: 10">
    <font size="2">Cost</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8; ">
    <p style="margin-top: 10">
    <font size="2">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8; " align="right">
    <p style="margin-top: 10">
    <font size="2">$</font></td>
    <td width="55" valign="bottom" style="background: #EAF9E8; ">
    <p align="right" style="margin-top: 10"><font size="2">1,287,058&nbsp;</font></td>
    <td width="5" valign="bottom" style="background: #EAF9E8; ">
    <p style="margin-top: 10">
    <font size="2">&nbsp;</font></td>
    <td width="8" valign="bottom" style="background: #EAF9E8; " align="right">
    <p style="margin-top: 10">
    <font size="2">$</font></td>
    <td width="51" valign="bottom" style="background: #EAF9E8; ">
    <p align="right" style="margin-top: 10"><font size="2">1,175,647&nbsp;</font></td>
    <td width="6" valign="bottom" style="background: #EAF9E8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #FFFFFF; border-bottom-style:solid; border-bottom-width:1" width="534">

    <font size="2">Accumulated depreciation</font></td>
    <td width="11" valign="bottom" bgcolor="#FFFFFF" style="border-bottom-style: solid; border-bottom-width: 1">
    <font size="2">&nbsp;</font></td>
    <td width="9" valign="bottom" bgcolor="#FFFFFF" style="border-bottom-style: solid; border-bottom-width: 1" align="right">
    <font size="2">&nbsp;</font></td>
    <td width="55" valign="bottom" bgcolor="#FFFFFF" style="border-bottom-style: solid; border-bottom-width: 1">
    <p align="right"><font size="2">(220,262)</font></td>
    <td width="5" valign="bottom" style="background: #FFFFFF; border-bottom-style:solid; border-bottom-width:1">

    <font size="2">&nbsp;</font></td>
    <td width="8" valign="bottom" bgcolor="#FFFFFF" style="border-bottom-style: solid; border-bottom-width: 1" align="right">
    <font size="2">&nbsp;</font></td>
    <td width="51" valign="bottom" bgcolor="#FFFFFF" style="border-bottom-style: solid; border-bottom-width: 1">
    <p align="right"><font size="2">(141,314)</font></td>
    <td width="6" valign="bottom" style="background: #FFFFFF; ">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" width="534" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double" bgcolor="#EAF9E8">
    <font size="2">&nbsp;Net patent</font></td>
    <td width="11" valign="bottom" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double" bgcolor="#EAF9E8">
    <font size="2">&nbsp;</font></td>
    <td width="9" valign="bottom" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double" align="right" bgcolor="#EAF9E8">
    <font size="2">$</font></td>
    <td width="55" valign="bottom" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double" bgcolor="#EAF9E8">
    <p align="right"><font size="2">1,066,796&nbsp;</font></td>
    <td width="5" valign="bottom" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double" bgcolor="#EAF9E8">

    <font size="2">&nbsp;</font></td>
    <td width="8" valign="bottom" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double" align="right" bgcolor="#EAF9E8">
    <font size="2">$</font></td>
    <td width="51" valign="bottom" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double" bgcolor="#EAF9E8">
    <p align="right"><font size="2">1,034,333&nbsp;</font></td>
    <td width="6" valign="bottom" bgcolor="#EAF9E8">
    <font size="2">&nbsp;</font></td>
  </tr>
  </table>
<p style=" margin-bottom:0pt; margin-top:0pt;" align="center">&nbsp;</p>
<p style=" margin-bottom:0pt; margin-top:0pt;" align="center"><font size="2">
F-13</font></p>
<hr size="3" color="#C0C0C0">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
<p>&nbsp;</p>

<p style="page-break-before:always"><a href="#TABLE OF CONTENTS"><font size="1">
TABLE OF CONTENTS</font></a></p>

<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse;">
  <tr>
    <td width="60%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><b><font size="2">American
    Technology Corporation</font></b><br>
    <b><font size="2">Notes to the Financial Statements</font></b></td>
  </tr>
  <tr>
    <td valign="bottom">
    <div style="border:none;border-bottom:solid .05em;padding:0in 0in 1.0pt 0in">
      <div style="border:none;border-bottom:solid .25em;padding:0in 0in 1.0pt 0in">
      </div>
    </div>
    </td>
  </tr>
</table>

<p style=" margin-bottom:0pt; margin-top:8pt;"><u><font size="2">Aggregate
Amortization Expense for Intangibles</font></u></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">Aggregate
amortization expense for the Company&#146;s intangible assets are summarized as
follows. In addition to amortization, the Company wrote off $58,138 of patent
costs during the year ended September 30, 2002.</font></p>

<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">&nbsp;</font></p>

<table border="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="0">
  <tr>
    <td width="58%" style="border-bottom-style: solid; border-bottom-width: 1" bgcolor="#EAF9E8">
    <b><font size="2">Years Ended September 30,</font></b></td>
    <td width="3%" style="border-bottom-style: solid; border-bottom-width: 1" bgcolor="#EAF9E8">
    <b><font size="2">&nbsp;</font></b></td>
    <td width="8%" style="border-bottom-style: solid; border-bottom-width: 1" bgcolor="#EAF9E8">
    <p align="center"><b><font size="2">2003</font></b></td>
    <td width="5%" style="border-bottom-style: solid; border-bottom-width: 1" bgcolor="#EAF9E8">
    <b><font size="2">&nbsp;</font></b></td>
    <td width="3%" style="border-bottom-style: solid; border-bottom-width: 1" bgcolor="#EAF9E8">
    <b><font size="2">&nbsp;</font></b></td>
    <td width="8%" style="border-bottom-style: solid; border-bottom-width: 1" bgcolor="#EAF9E8">
    <p align="center"><b><font size="2">2002</font></b></td>
    <td width="5%" style="border-bottom-style: solid; border-bottom-width: 1" bgcolor="#EAF9E8">
    <b><font size="2">&nbsp;</font></b></td>
    <td width="2%" style="border-bottom-style: solid; border-bottom-width: 1" bgcolor="#EAF9E8">
    <b><font size="2">&nbsp;</font></b></td>
    <td width="12%" style="border-bottom-style: solid; border-bottom-width: 1" bgcolor="#EAF9E8">
    <p align="center"><b><font size="2">2001</font></b></td>
  </tr>
  <tr>
    <td width="58%" style="border-top-style: solid; border-top-width: 1">
    <font size="2">&nbsp;</font></td>
    <td width="3%" style="border-top-style: solid; border-top-width: 1">
    <font size="2">&nbsp;</font></td>
    <td width="8%" style="border-top-style: solid; border-top-width: 1">
    <font size="2">&nbsp;</font></td>
    <td width="5%" style="border-top-style: solid; border-top-width: 1">
    <font size="2">&nbsp;</font></td>
    <td width="3%" style="border-top-style: solid; border-top-width: 1">
    <font size="2">&nbsp;</font></td>
    <td width="8%" style="border-top-style: solid; border-top-width: 1">
    <font size="2">&nbsp;</font></td>
    <td width="5%" style="border-top-style: solid; border-top-width: 1">
    <font size="2">&nbsp;</font></td>
    <td width="2%" style="border-top-style: solid; border-top-width: 1">
    <font size="2">&nbsp;</font></td>
    <td width="12%" style="border-top-style: solid; border-top-width: 1">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td width="58%" bgcolor="#EAF9E8"><font size="2">Purchased technology</font></td>
    <td width="3%" bgcolor="#EAF9E8">
    <p align="right"><font size="2">$</font></td>
    <td width="8%" bgcolor="#EAF9E8">
    <p align="right"><font size="2">315,636</font></td>
    <td width="5%" bgcolor="#EAF9E8"><font size="2">&nbsp;</font></td>
    <td width="3%" bgcolor="#EAF9E8">
    <p align="right"><font size="2">$</font></td>
    <td width="8%" bgcolor="#EAF9E8">
    <p align="right"><font size="2">420,828</font></td>
    <td width="5%" bgcolor="#EAF9E8"><font size="2">&nbsp;</font></td>
    <td width="2%" bgcolor="#EAF9E8">
    <p align="right"><font size="2">$</font></td>
    <td width="12%" bgcolor="#EAF9E8">
    <p align="right"><font size="2">420,829</font></td>
  </tr>
  <tr>
    <td width="58%"><font size="2">Patents</font></td>
    <td width="3%"><font size="2">&nbsp;</font></td>
    <td width="8%" style="border-bottom-style: solid; border-bottom-width: 1">
    <p align="right"><font size="2">79,544</font></td>
    <td width="5%"><font size="2">&nbsp;</font></td>
    <td width="3%">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td width="8%" style="border-bottom-style: solid; border-bottom-width: 1">
    <p align="right"><font size="2">61,730</font></td>
    <td width="5%"><font size="2">&nbsp;</font></td>
    <td width="2%"><font size="2">&nbsp;</font></td>
    <td width="12%" style="border-bottom-style: solid; border-bottom-width: 1">
    <p align="right"><font size="2">38,405</font></td>
  </tr>
  <tr>
    <td width="58%" bgcolor="#EAF9E8"><font size="2">&nbsp;</font></td>
    <td width="3%" bgcolor="#EAF9E8">
    <p align="right"><font size="2">$</font></td>
    <td width="8%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double" bgcolor="#EAF9E8">
    <p align="right"><font size="2">395,180</font></td>
    <td width="5%" bgcolor="#EAF9E8"><font size="2">&nbsp;</font></td>
    <td width="3%" bgcolor="#EAF9E8">
    <p align="right"><font size="2">$</font></td>
    <td width="8%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double" bgcolor="#EAF9E8">
    <p align="right"><font size="2">482,558</font></td>
    <td width="5%" bgcolor="#EAF9E8"><font size="2">&nbsp;</font></td>
    <td width="2%" bgcolor="#EAF9E8">
    <p align="right"><font size="2">$</font></td>
    <td width="12%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double" bgcolor="#EAF9E8">
    <p align="right"><font size="2">459,234</font></td>
  </tr>
</table>

<p><font size="2">&nbsp;</font></p>

<table border="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="0">
  <tr>
    <td width="89%" style="border-bottom-style: solid; border-bottom-width: 1" bgcolor="#EAF9E8">
    <b><font size="2">Estimated Amortization Expense Years Ended September 30,</font></b></td>
    <td width="4%" style="border-bottom-style: solid; border-bottom-width: 1" bgcolor="#EAF9E8">
    <font size="2">&nbsp;</font></td>
    <td width="7%" style="border-bottom-style: solid; border-bottom-width: 1" bgcolor="#EAF9E8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td width="89%" style="border-top-style: solid; border-top-width: 1">
    <font size="2">2004</font></td>
    <td width="4%" style="border-top-style: solid; border-top-width: 1">
    <p align="right"><font size="2">$</font></td>
    <td width="7%" style="border-top-style: solid; border-top-width: 1">
    <p align="right"><font size="2">86,300</font></td>
  </tr>
  <tr>
    <td width="89%" bgcolor="#EAF9E8"><font size="2">2005</font></td>
    <td width="4%" bgcolor="#EAF9E8"><font size="2">&nbsp;</font></td>
    <td width="7%" bgcolor="#EAF9E8">
    <p align="right"><font size="2">86,300</font></td>
  </tr>
  <tr>
    <td width="89%"><font size="2">2006</font></td>
    <td width="4%"><font size="2">&nbsp;</font></td>
    <td width="7%">
    <p align="right"><font size="2">86,300</font></td>
  </tr>
  <tr>
    <td width="89%" bgcolor="#EAF9E8"><font size="2">2007</font></td>
    <td width="4%" bgcolor="#EAF9E8"><font size="2">&nbsp;</font></td>
    <td width="7%" bgcolor="#EAF9E8">
    <p align="right"><font size="2">86,300</font></td>
  </tr>
  <tr>
    <td width="89%"><font size="2">2008</font></td>
    <td width="4%"><font size="2">&nbsp;</font></td>
    <td width="7%">
    <p align="right"><font size="2">86,300</font></td>
  </tr>
  <tr>
    <td width="89%" bgcolor="#EAF9E8"><font size="2">Thereafter</font></td>
    <td width="4%" bgcolor="#EAF9E8"><font size="2">&nbsp;</font></td>
    <td width="7%" bgcolor="#EAF9E8">
    <p align="right"><font size="2">635,296</font></td>
  </tr>
</table>

<p style=" margin-bottom:0pt; margin-top:0pt;">&nbsp;</p>

<p style=" margin-bottom:0pt; margin-top:0pt;"><b><font size="2">4. INCOME
TAXES</font></b></p>

<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">Income taxes
consisted of the following:</font></p>
<p style=" margin-bottom:0pt; margin-top:0pt;"><font size="2">&nbsp;</font></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; " bordercolor="#111111">
  <tr>
    <td valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">
    <p style="margin-top:2pt;margin-bottom:0pt;"><b><font size="2">Years ended
    September 30,</font></b></td>
    <td width="3%" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">
    <font size="2">&nbsp;</font></td>
    <td width="11%" colspan="2" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="2">2003</font></b></td>
    <td width="3%" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">
    <font size="2">&nbsp;</font></td>
    <td width="10%" colspan="2" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="2">2002</font></b></td>
    <td width="3%" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">
    <font size="2">&nbsp;</font></td>
    <td width="11%" colspan="2" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="2">2001</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="border-top-style: solid; border-top-width: 1">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Deferred (benefit)</font></td>
    <td width="3%" valign="bottom" style="border-top-style: solid; border-top-width: 1"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="border-top-style: solid; border-top-width: 1">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="border-top-style: solid; border-top-width: 1">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="3%" valign="bottom" style="border-top-style: solid; border-top-width: 1"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="border-top-style: solid; border-top-width: 1">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="border-top-style: solid; border-top-width: 1">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="3%" valign="bottom" style="border-top-style: solid; border-top-width: 1"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="border-top-style: solid; border-top-width: 1">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="border-top-style: solid; border-top-width: 1">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Federal</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(2,801,000</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(2,053,000</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(1,815,000</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">State</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(494,000</font></td>
    <td width="3%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(362,000</font></td>
    <td width="3%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(320,000</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="1">&nbsp;</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8; border-top-style:solid; border-top-width:1">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(3,295,000</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8; border-top-style:solid; border-top-width:1">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(2,415,000</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8; border-top-style:solid; border-top-width:1">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(2,135,000</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Change in valuation allowance</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3,295,000</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">2,415,000</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">2,135,000</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="1">&nbsp;</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8; border-bottom-style:double">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;&nbsp;</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="9%" valign="bottom"style="background: #EAF9E8; border-bottom-style:double">
    <p align="right">
    <font size="2">&#151;&nbsp;</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8; border-bottom-style:double">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;&nbsp;</font></td>
  </tr>
  </table>

<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">A reconciliation
of income taxes at the federal statutory rate of 34% to the effective tax rate
is as follows:</font></p>
<p style=" margin-bottom:0pt; margin-top:0pt;"><font size="2">&nbsp;</font></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; " bordercolor="#111111">
  <tr>
    <td valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">
    <p style="margin-top:2pt;margin-bottom:0pt;"><b><font size="2">Years ended
    September 30,</font></b></td>
    <td width="3%" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">
    <font size="2">&nbsp;</font></td>
    <td width="10%" colspan="2" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="2">2003</font></b></td>
    <td width="3%" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">
    <font size="2">&nbsp;</font></td>
    <td width="11%" colspan="2" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="2">2002</font></b></td>
    <td width="3%" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">
    <font size="2">&nbsp;</font></td>
    <td width="10%" colspan="2" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="2">2001</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8; border-top-style:solid; border-top-width:1">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Income taxes (benefit) computed at the federal statutory rate</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8; border-top-style:solid; border-top-width:1"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8; border-top-style:solid; border-top-width:1">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8; border-top-style:solid; border-top-width:1">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(2,797,000</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8; border-top-style:solid; border-top-width:1"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8; border-top-style:solid; border-top-width:1">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8; border-top-style:solid; border-top-width:1">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(2,795,000</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8; border-top-style:solid; border-top-width:1"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8; border-top-style:solid; border-top-width:1">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8; border-top-style:solid; border-top-width:1">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(1,716,000</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Tax effect of change in valuation allowance</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3,295,000</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">2,415,000</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">2,135,000</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Nondeductible compensation interest expense and other</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">30,000</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">957,000</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">13,000</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">State income taxes (benefit), net of federal tax benefit</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(494,000</font></td>
    <td width="3%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(493,000</font></td>
    <td width="3%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(303,000</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Other</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8; border-bottom-style:solid; border-bottom-width:1">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(34,000</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8; border-bottom-style:solid; border-bottom-width:1">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(84,000</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8; border-bottom-style:solid; border-bottom-width:1">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(129,000</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="1">&nbsp;</font></td>
    <td width="3%" valign="bottom" style="background: #FFFFFF; "><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #FFFFFF; ">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="9%" valign="bottom" style="background: #FFFFFF; border-bottom-style:double">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;&nbsp;</font></td>
    <td width="3%" valign="bottom" style="background: #FFFFFF; "><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #FFFFFF; ">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="9%" valign="bottom"style="background: #FFFFFF; border-bottom-style:double">
    <p align="right">
    <font size="2">&#151;&nbsp;</font></td>
    <td width="3%" valign="bottom" style="background: #FFFFFF; "><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #FFFFFF; ">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="9%" valign="bottom" style="background: #FFFFFF; border-bottom-style:double">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #FFFFFF; "><font size="1">&nbsp;&nbsp;</font></td>
  </tr>
  </table>

<p align="center"><font face="Times New Roman" size="2">F-14</font></p>
<hr size="3" color="#C0C0C0">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
<p>&nbsp;</p>

<p style="page-break-before:always"><a href="#TABLE OF CONTENTS"><font size="1">
TABLE OF CONTENTS</font></a></p>

<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td width="60%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><b><font size="2">American
    Technology Corporation</font></b><br>
    <b><font size="2">Notes to the Financial Statements</font></b></td>
  </tr>
  <tr>
    <td valign="bottom">
    <div style="border:none;border-bottom:solid .05em;padding:0in 0in 1.0pt 0in">
      <div style="border:none;border-bottom:solid .25em;padding:0in 0in 1.0pt 0in">
      </div>
    </div>
    </td>
  </tr>
</table>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The types of
temporary differences between the tax basis of assets and liabilities and their
approximate tax effects that give rise to a significant portion of the net
deferred tax asset (liability) at September 30, 2003 and 2002 are as follows:</font></p>
<p style=" margin-bottom:0pt; margin-top:0pt;"><font size="2">&nbsp;</font></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><b><font size="1">Deferred tax
    assets:</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">2003</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">2002</font></b></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Net operating loss carryforwards</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">12,382,000</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">9,304,000</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Research and development credit</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">220,000</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">185,000</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Equipment</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">176,000</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">93,000</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Purchased technology</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">93,000</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">151,000</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Accruals and other</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">341,000</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">186,000</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Allowances</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">10,000</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">8,000</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:25.9pt;text-indent:-8.65pt;">
    <font size="2">Gross deferred tax asset</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">13,222,000</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">9,927,000</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:25.9pt;text-indent:-8.65pt;">
    <font size="2">Less valuation allowance</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(13,222,000</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(9,927,000</font></td>
    <td width="1%" valign="bottom"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p style=" margin-bottom:0pt; margin-top:8pt;">&nbsp;</p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The utilization of
the net operating loss carryforwards could be substantially limited due to
restrictions imposed under federal and state laws upon a change ownership. The
amount of the limitation, if any, has not been determined at this time.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">A valuation
allowance has been recorded to offset the net deferred tax asset as management
has been unable to determine that it is more likely than not that the deferred
tax asset will be realized.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">At September 30,
2003, the Company, for federal income tax purposes, has net operating loss
carryforwards of approximately $28,500,000 which expire through 2024 of which
certain amounts are subject to limitations under the Internal Revenue Code of
1986, as amended.</font></p>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font size="2">5. SENIOR
SECURED AND CONVERTIBLE SUBORDINATED PROMISSORY NOTES </font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><u><font size="2">8% Senior
Secured Promissory Notes</font></u></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">On September 30,
2002, the Company issued to accredited investors 8% Senior Secured Promissory
Notes (&#147;Senior Notes&#148;) for cash proceeds of $1,500,000. The Senior Notes were
due on the earlier to occur of (i) December 31, 2003 or (ii) when declared due
and payable by the Holder upon the occurrence of an Event of Default (the
&#147;Maturity Date&#148;) and were secured by accounts receivable, certain equipment and
inventory. In January 2003 the Company received an additional $500,000 in cash
proceeds on the Senior Notes. In February 2003 a total of $1,000,000 of Senior
Note principal was converted into shares of Series E Preferred Stock (see Note
6). Accrued interest and a redemption premium of $13,333 was paid in cash at
conversion. In June 2003 $681,845 of Senior Note principal was applied to the
exercise of 259,500 warrants and in July 2003 the remaining principal balance of
$318,155 plus accrued interest and a redemption premium of $13,333 was paid in
cash pursuant to the redemption terms of the Senior Notes triggered by the
Company&#146;s July 2003 private placement of common stock and warrants.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><u><font size="2">12% Convertible
Subordinated Promissory Notes</font></u></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">In September and
October 2001, the Company sold for cash in a private offering an aggregate of
$2,025,000 of unsecured 12% Convertible Subordinated Promissory Notes (&#147;Notes&#148;)
to accredited investors and related parties. The Notes were originally due
December 31, 2002, but the maturity date was extended to December 31, 2003 by
amendment dated November 19, 2002. The principal and interest amount of each
Note was convertible, at the election of the Note holder one or more times into
fully paid and nonassessable shares of common stock at a price of $2.00 per
share. Each purchaser was granted a warrant to purchase one common share of the
Company at $2.00 per share until September 30, 2006 (the &#147;Warrant&#148;) for each
$2.00 of Notes (aggregate Warrants exercisable into 1,012,500 shares). As of
September 30, 2003 a total of 887,500 of these warrants were outstanding.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">In connection with
the Notes and Warrants, the Company recorded a $2,025,000 discount to the notes
to reflect the value of the beneficial conversion feature of the Notes and the
value of the Warrants. The Warrants were valued using the Black-Scholes model
and the value was reflected as a discount to the debt. This debt discount was
amortized as non-cash interest expense over the original term of the Notes. For
the years ended September 30, 2003 and 2002, $405,000 and $1,620,000 was
amortized as non-cash interest expense, respectively. </font></p>

<p align="center"><font face="Times New Roman" size="2">F-15</font></p>
<hr size="3" color="#C0C0C0">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
<p>&nbsp;</p>

<p style="page-break-before:always"><a href="#TABLE OF CONTENTS"><font size="1">
TABLE OF CONTENTS</font></a></p>

<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td width="60%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><b><font size="2">American
    Technology Corporation</font></b><br>
    <b><font size="2">Notes to the Financial Statements</font></b></td>
  </tr>
  <tr>
    <td valign="bottom">
    <div style="border:none;border-bottom:solid .05em;padding:0in 0in 1.0pt 0in">
      <div style="border:none;border-bottom:solid .25em;padding:0in 0in 1.0pt 0in">
      </div>
    </div>
    </td>
  </tr>
</table>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">In June 2003 the
Company exercised its right to call the Notes for mandatory conversion into
shares of common stock. The principal of the Notes of $2,025,000 and accrued
interest of $410,032 was converted into 1,217,516 shares of common stock.</font></p>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font size="2">6.
STOCKHOLDERS&#146; EQUITY</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><u><font size="2">Common Stock</font></u></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">In July 2003 the
Company obtained gross proceeds of $10,000,000 from an offering of common stock
and warrants. The offering included 1,818,180 shares
of common stock at a purchase price of $5.50 per share and warrants to purchase
454,547 shares of common stock with an exercise price of $6.75 per share. The
warrants are exercisable until July 10, 2007. The warrants contain certain antidilution rights if we sell common stock equivalents, as defined, below
$6.75. Offering costs were $545,000.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><u><font size="2">Preferred Stock</font></u></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The Company is
authorized to issue 5,000,000 shares of preferred stock, $0.00001 par value,
without any action by the stockholders. The board of directors has the authority
to divide any and all shares of preferred stock into series and to fix and
determine the relative rights and preferences of the preferred stock, such as
the designation of series and the number of shares constituting such series,
dividend rights, redemption and sinking fund provisions, liquidation and
dissolution preferences, conversion or exchange rights and voting rights, if
any. Issuance of preferred stock by the board of directors could result in such
shares having dividend and or liquidation preferences senior to the rights of
the holders of common stock and could dilute the voting rights of the holders of
common stock.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The following is a
summary of the terms of the preferred stock series outstanding during the three
fiscal years ended September 30, 2003.</font></p>
<p style=" margin-bottom:0pt; margin-top:0pt;"><font size="2">&nbsp;</font></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Preferred</font></b><br>
    <b><font size="1">Series</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="13%" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Issuance</font></b><br>
    <b><font size="1">Date</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="10%" colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Aggregate</font></b><br>
    <b><font size="1">Purchase Price</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="15%" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Number of </font></b><br>
    <b><font size="1">Shares</font></b><br>
    <b><font size="1">Authorized/</font></b><br>
    <b><font size="1">Issued</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="39%" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Terms</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top" style="background: #EAF9E8">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">6% Series B issued at $10.00 per share</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="13%" valign="top" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">December 1998
    and January 1999</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="top" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="9%" valign="top" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">2,500,000 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="15%" valign="top" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">250,000/250,000</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="39%" valign="top" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">Purchase price
    plus 6% accretion convertible at lower of $5.00 per share or 92% of market
    but not less than $3.50 per share. Callable at market price of $12.00 per
    share. Automatic conversion to common stock on November 30, 2001.</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">6% Series C issued at $20.00 per share</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="13%" valign="top">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">March 2000</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="top">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="9%" valign="top">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">6,000,000 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="15%" valign="top">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">300,000/300,000</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="39%" valign="top">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">Purchase price
    plus 6% accretion convertible at lower of $8.00 per share or 92% of market
    but not less than $5.75 per share. Callable at market price of $20.00 per
    share. Automatic conversion to common stock on March 31, 2003.</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top" style="background: #EAF9E8">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">6% Series D issued at $10.00 per share</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="13%" valign="top" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">May 2002</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="top" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="9%" valign="top" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">2,354,000 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="15%" valign="top" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">250,000/235,400</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="39%" valign="top" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">Purchase price
    plus 6% accretion convertible at lower of $4.50 per share or 90% of market
    but not less than $2.00 per share, subject to antidilution adjustment.
    Callable at market price of $9.50 per share. Automatic conversion to common
    stock on June 30, 2006.</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">6% Series E issued at $10.00 per share</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="13%" valign="top">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">March 2003</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="top">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="9%" valign="top">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3,432,500 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="15%" valign="top">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">350,000/343,250</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="39%" valign="top">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">Purchase price
    plus 6% accretion convertible at lower of $3.25 per share or 90% of market
    but not less than $2.00 per share, subject to antidilution adjustment.
    Callable at market price of $9.50 per share. Automatic conversion to common
    stock on December 31, 2006.</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p><br>
<br>
</p>
<p style="margin-bottom:0pt;text-align:center"><font size="2">F-16</font></p>
<p><br>
</p>
<hr noshade align="center" width="100%" size="2">
<p style="page-break-before:always"><a href="#TABLE OF CONTENTS"><font size="1">
TABLE OF CONTENTS</font></a></p>

<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td width="60%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><b><font size="2">American
    Technology Corporation</font></b><br>
    <b><font size="2">Notes to the Financial Statements</font></b></td>
  </tr>
  <tr>
    <td valign="bottom">
    <div style="border:none;border-bottom:solid .05em;padding:0in 0in 1.0pt 0in">
      <div style="border:none;border-bottom:solid .25em;padding:0in 0in 1.0pt 0in">
      </div>
    </div>
    </td>
  </tr>
</table>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The above
preferred shares were sold for cash except that $1,000,000 of the Series E Stock
purchase price resulted from the conversion of Senior Notes. In connection with
the Series C Stock financing, the Company issued a warrant to purchase 75,000
shares of common stock at $11.00 per share until March 31, 2005 as a placement
fee. The value assigned to the warrant issued as a placement fee was $468,783.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">At September 30,
2003 all of the Series B and Series C Stock had been converted into common
stock. At September 30, 2003 the remaining 50,000 shares of Series D Stock would
have been convertible into 120,556 shares of common stock and the remaining
263,250 shares of Series E Stock would have been convertible into 838,890 shares
of common stock.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The Company
granted warrants with each issuance of preferred stock. The cash proceeds of the
preferred stock were allocated prorata between the relative fair values of the
preferred stock and warrants at issuance using the Black Scholes valuation model
for valuing the warrants. After allocating the proceeds between the preferred
stock and warrant, an effective conversion price was calculated for the
convertible preferred stock to determine the beneficial conversion discount for
each share. The value of the beneficial conversion discount and the value of the
warrants is recorded as a deemed dividend and accreted over the conversion
period of the preferred stock. The following table summarizes values assigned as
a deemed dividend for the value of the warrants and the beneficial conversion
feature on each preferred stock issuance.</font></p>
<p style=" margin-bottom:0pt; margin-top:0pt;"><font size="2">&nbsp;</font></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="4%" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="19%" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="3%" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="21%" colspan="5" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Deemed Dividend</font></b></td>
    <td width="1%" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="4%" valign="top"><font size="1">&nbsp;</font></td>
    <td width="19%" valign="top"><font size="1">&nbsp;</font></td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
    <td width="11%" valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="top"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="5" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Preferred</font></b><br>
    <b><font size="1">Series</font></b></td>
    <td width="4%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="19%" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Issuance</font></b><br>
    <b><font size="1">Date</font></b></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Number </font></b><br>
    <b><font size="1">Of Warrants</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Warrant</font></b><br>
    <b><font size="1">Exercise</font></b><br>
    <b><font size="1">Price</font></b></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Warrant</font></b><br>
    <b><font size="1">Expiration</font></b><br>
    <b><font size="1">Date</font></b></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="10%" colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Value </font></b><br>
    <b><font size="1">Assigned</font></b><br>
    <b><font size="1">To </font></b><br>
    <b><font size="1">Warrants</font></b></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Value Of</font></b><br>
    <b><font size="1">Beneficial</font></b><br>
    <b><font size="1">Conversion</font></b><br>
    <b><font size="1">Discount</font></b></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="4%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td align="center" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">6% Series B</font></td>
    <td width="4%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="19%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:center;">
    <font size="2">December 1998</font><br>
    <font size="2">and January 1999</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">250,000</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" align="left" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">6.00 </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">11/30/01</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">595,000 </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">656,000 </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td align="center" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">6% Series C</font></td>
    <td width="4%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="19%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:center;">
    <font size="2">March 2000</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">300,000</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" align="left" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">11.00 </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3/31/03</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">1,478,000 </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">2,509,000 </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td align="center" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">6% Series D</font></td>
    <td width="4%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="19%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:center;">
    <font size="2">May 2002</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">517,880</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" align="left" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3.01 </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3/31/07</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">1,029,519 </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">994,310 </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td align="center" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">6% Series E </font></td>
    <td width="4%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="19%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:center;">
    <font size="2">March 2003</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">514,875</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" align="left" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3.25 </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">12/31/07</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">755,500 </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">2,677,000 </font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p style=" margin-bottom:0pt; margin-top:8pt;">&nbsp;</p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The Series D
warrants were originally exercisable at $4.50 per common share and valued at
$871,000. The Series E financing resulted in a repricing of the Series D
Warrants to $3.01 per common share and an additional $158,519 was assigned to
the warrant value. The Series D Warrants were valued using the Black-Scholes
model with a dividend yield of zero percent; expected volatility of 78 percent;
risk free interest rate of 4.94 percent; and an expected life of five years. The
Series E Warrants were valued using the Black-Scholes model with a dividend
yield of zero percent; expected volatility of 76.5 percent; risk free interest
rate of 4.0 percent; and an expected life of five years.</font></p>

<p align="center"><font face="Times New Roman" size="2">F-17</font></p>
<hr size="3" color="#C0C0C0">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
<p>&nbsp;</p>

<p style="page-break-before:always"><a href="#TABLE OF CONTENTS"><font size="1">
TABLE OF CONTENTS</font></a></p>

<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td width="60%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><b><font size="2">American
    Technology Corporation</font></b><br>
    <b><font size="2">Notes to the Financial Statements</font></b></td>
  </tr>
  <tr>
    <td valign="bottom">
    <div style="border:none;border-bottom:solid .05em;padding:0in 0in 1.0pt 0in">
      <div style="border:none;border-bottom:solid .25em;padding:0in 0in 1.0pt 0in">
      </div>
    </div>
    </td>
  </tr>
</table>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The following
table summarizes information about the deemed dividend activity commencing in
May 2002. Other than 6% per annum accretion on Series B and C there was no
deemed dividend for fiscal 2001.</font></p>
<p style=" margin-bottom:0pt; margin-top:0pt;"><font size="2">&nbsp;</font></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="39%" colspan="7" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Number</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="10%" colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="7" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td width="10%" colspan="2" valign="top"><font size="1">&nbsp;</font></td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">Series D</font></b><br>
    <b><font size="1">Preferred</font></b><br>
    <b><font size="1">Shares</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">Series D</font></b><br>
    <b><font size="1">Warrants</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">Series E</font></b><br>
    <b><font size="1">Preferred</font></b><br>
    <b><font size="1">Shares</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">Series E</font></b><br>
    <b><font size="1">Warrants</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="10%" colspan="2" valign="bottom">
    <p style="text-align:center;margin-bottom:0pt;margin-top:0in;"><b>
    <font size="1">Balance </font></b><br>
    <b><font size="1">of</font></b><br>
    <b><font size="1">Deemed</font></b><br>
    <b><font size="1">Dividend</font></b></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">Series D Issued in May 2002</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">235,400 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">517,880 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">1,865,310 </font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">Fiscal 2002 accretion</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(195,936</font></td>
    <td width="3%" valign="bottom"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <b><font size="2">Balance September 30, 2002</font></b></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">235,400</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">517,880</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">1,669,374</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">Series E Issued in February 2003</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">343,250</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">514,875</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3,432,500 </font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">Deemed dividend on preferred stock converted</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(185,400</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(80,000</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(1,324,224</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">Additional deemed dividend on D warrant repricing</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">158,519</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">Deemed dividend on warrants exercised</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(22,000</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(120,000</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(215,904</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">Accretion on outstanding Series D and E Stock</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(681,442</font></td>
    <td width="3%" valign="bottom"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <b><font size="2">Balance September 30, 2003</font></b></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">50,000</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">495,880</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">263,250 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">394,875</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3,038,823 </font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="3%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">Total deemed dividend accretion Fiscal 2003</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(2,221,570</font></td>
    <td width="3%" valign="bottom"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td width="7%" valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td width="7%" valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p style=" margin-bottom:0pt; margin-top:8pt;">&nbsp;</p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><u><font size="2">Stock Purchase
Warrants</font></u></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">A summary of the
status of outstanding stock purchase warrants outstanding as of September 30,
2001, 2002 and 2003 and the changes during the years then ended is presented
below:</font></p>
<p style=" margin-bottom:0pt; margin-top:0pt;"><font size="2">&nbsp;</font></p>
<table width="681" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td valign="bottom" width="537">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="14" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="60" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Number</font></b></td>
    <td width="14" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom" width="48">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Average</font></b><br>
    <b><font size="1">Purchase</font></b><br>
    <b><font size="1">Price</font></b></td>
    <td width="8" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top" width="537"><font size="1">&nbsp;</font></td>
    <td width="14" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top" width="60">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="14" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top" width="48">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="8" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8" width="537">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Shares purchasable under outstanding warrants at October 1,
    2000</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="60" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">715,000 </font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="36" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">9.60 </font></td>
    <td width="8" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" width="537">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Stock purchase warrants issued</font></td>
    <td width="14" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="60" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">400,000 </font></td>
    <td width="14" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="36" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">2.00 </font></td>
    <td width="8" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8" width="537">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Stock purchase warrants exercised</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="60" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="36" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="8" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" width="537">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Stock purchase warrants expired</font></td>
    <td width="14" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="60" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="14" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="36" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="8" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top" width="537"><font size="1">&nbsp;</font></td>
    <td width="14" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top" width="60">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="14" valign="top"><font size="1">&nbsp;</font></td>
    <td width="12" valign="top"><font size="1">&nbsp;</font></td>
    <td width="36" valign="top"><font size="1">&nbsp;</font></td>
    <td width="8" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8" width="537">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Shares purchasable under outstanding warrants at September
    30, 2001</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="60" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">1,115,000 </font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="36" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">6.87 </font></td>
    <td width="8" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" width="537">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Stock purchase warrants issued</font></td>
    <td width="14" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="60" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">1,230,380 </font></td>
    <td width="14" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="36" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3.26 </font></td>
    <td width="8" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8" width="537">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Stock purchase warrants exercised</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="60" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="36" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="8" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" width="537">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Stock purchase warrants expired</font></td>
    <td width="14" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="60" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(240,000</font></td>
    <td width="14" valign="bottom"><font size="2">)</font></td>
    <td width="12" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="36" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">6.00 </font></td>
    <td width="8" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top" width="537"><font size="1">&nbsp;</font></td>
    <td width="14" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top" width="60">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="14" valign="top"><font size="1">&nbsp;</font></td>
    <td width="12" valign="top"><font size="1">&nbsp;</font></td>
    <td width="36" valign="top"><font size="1">&nbsp;</font></td>
    <td width="8" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8" width="537">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Shares purchasable under outstanding warrants at September
    30, 2002</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="60" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">2,105,380 </font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="36" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">4.85 </font></td>
    <td width="8" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" width="537">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Stock purchase warrants issued</font></td>
    <td width="14" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="60" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">1,019,422 </font></td>
    <td width="14" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="36" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">4.83 </font></td>
    <td width="8" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8" width="537">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Stock purchase warrants exercised</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="60" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(347,000</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="12" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="36" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">2.60 </font></td>
    <td width="8" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" width="537">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Stock purchase warrants expired</font></td>
    <td width="14" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="60" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(350,000</font></td>
    <td width="14" valign="bottom"><font size="2">)</font></td>
    <td width="12" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="36" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">11.71 </font></td>
    <td width="8" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top" width="537"><font size="1">&nbsp;</font></td>
    <td width="14" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top" width="60">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="14" valign="top"><font size="1">&nbsp;</font></td>
    <td width="12" valign="top"><font size="1">&nbsp;</font></td>
    <td width="36" valign="top"><font size="1">&nbsp;</font></td>
    <td width="8" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8" width="537">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Shares purchasable under outstanding warrants at September
    30, 2003</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="60" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">2,427,802 </font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="12" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="36" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3.85 </font></td>
    <td width="8" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top" width="537"><font size="1">&nbsp;</font></td>
    <td width="14" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top" width="60">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="14" valign="top"><font size="1">&nbsp;</font></td>
    <td width="12" valign="top"><font size="1">&nbsp;</font></td>
    <td width="36" valign="top"><font size="1">&nbsp;</font></td>
    <td width="8" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
</table>

<p align="center"><font size="2" face="Times New Roman">F-18</font></p>
<hr size="3" color="#C0C0C0">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
<p>&nbsp;</p>

<p style="page-break-before:always"><a href="#TABLE OF CONTENTS"><font size="1">
TABLE OF CONTENTS</font></a></p>

<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td width="60%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><b><font size="2">American
    Technology Corporation</font></b><br>
    <b><font size="2">Notes to the Financial Statements</font></b></td>
  </tr>
  <tr>
    <td valign="bottom">
    <div style="border:none;border-bottom:solid .05em;padding:0in 0in 1.0pt 0in">
      <div style="border:none;border-bottom:solid .25em;padding:0in 0in 1.0pt 0in">
      </div>
    </div>
    </td>
  </tr>
</table>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">At September 30,
2003, the following stock purchase warrants were outstanding arising from
offerings and other transactions, each exercisable into one common share:</font></p>
<p style=" margin-bottom:0pt; margin-top:0pt;"><font size="2">&nbsp;</font></p>
<table align="center" width="65%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td width="21%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:center;"><b>
    <font size="1">Number</font></b></td>
    <td width="3%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:center;"><b>
    <font size="1">Exercise</font></b><br>
    <b><font size="1">Price</font></b></td>
    <td width="2%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="27%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:center;"><b>
    <font size="1">Expiration</font></b><br>
    <b><font size="1">Date</font></b></td>
  </tr>
  <tr>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
  </tr>
  <tr>
    <td width="21%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="1">&nbsp;</font></td>
    <td width="3%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="1%" align="left" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="27%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td width="21%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:center;">
    <font size="2">&nbsp;&nbsp;&nbsp;50,000</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="1%" align="left" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="2">10.00 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="27%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="2">January 5, 2004</font></td>
  </tr>
  <tr>
    <td width="21%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:center;">
    <font size="2">&nbsp;&nbsp;&nbsp;75,000</font></td>
    <td width="3%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="1%" align="left" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="2">11.00 </font></td>
    <td width="2%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="27%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="2">March 31, 2005</font></td>
  </tr>
  <tr>
    <td width="21%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:center;">
    <font size="2">&nbsp;&nbsp;837,500</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="1%" align="left" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="2">2.00 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="27%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="2">September 30, 2006</font></td>
  </tr>
  <tr>
    <td width="21%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:center;">
    <font size="2">&nbsp;&nbsp;495,880</font></td>
    <td width="3%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="1%" align="left" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="2">3.01 </font></td>
    <td width="2%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="27%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="2">March 31, 2007</font></td>
  </tr>
  <tr>
    <td width="21%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:center;">
    <font size="2">&nbsp;&nbsp;454,547</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="1%" align="left" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="2">6.75 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="27%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="2">July 10, 2007</font></td>
  </tr>
  <tr>
    <td width="21%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:center;">
    <font size="2">&nbsp;&nbsp;100,000</font></td>
    <td width="3%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="1%" align="left" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="2">4.25 </font></td>
    <td width="2%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="27%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="2">September 30, 2007</font></td>
  </tr>
  <tr>
    <td width="21%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:center;">
    <font size="2">&nbsp;&nbsp;364,875</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="1%" align="left" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="2">3.25 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="27%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="2">December 31, 2007</font></td>
  </tr>
  <tr>
    <td width="21%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:center;">
    <font size="2">&nbsp;&nbsp;&nbsp;50,000</font></td>
    <td width="3%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="1%" align="left" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="2">3.63 </font></td>
    <td width="2%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="27%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="2">April 8, 2007</font></td>
  </tr>
  <tr>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
    <td width="1%" align="left" valign="top"><font size="1">&nbsp;</font></td>
    <td width="6%" valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td width="27%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td width="21%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:center;">
    <font size="2">2,427,802</font></td>
    <td width="3%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="1%" align="left" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="27%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:right;">
    <font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="3%" valign="top"><font size="1">&nbsp;</font></td>
    <td width="1%" align="left" valign="top"><font size="1">&nbsp;</font></td>
    <td width="6%" valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td width="27%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p style=" margin-bottom:0pt; margin-top:8pt;">&nbsp;</p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The $3.01
warrants, the $3.25 warrants and the $6.75 warrants contain certain antidilution
rights if the Company sells securities for less than the exercise price.</font></p>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font size="2">7. BENEFIT
PLANS</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><u><font size="2">2002 Stock
Option Plan</font></u></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The Company has a
Stock Option Plan, expiring September 30, 2012, reserving the issuance of
2,350,000 shares of common stock (&#147;2002 Plan&#148;). The options issued under the
2002 Plan may, in the discretion of the Board, be either Incentive Stock Options
or Nonstatutory Stock Options. The 2002 Plan provides for grants to employees,
directors or consultants, in the discretion of the Board of Directors, of
options to purchase common stock of the Company at a price not less than the
fair market value of the shares on the date of grant. In the case of a
significant stockholder, the option price of shares will not be less than 110
percent of the fair market value of the shares on the date of grant. Any options
granted under the 2002 Plan must be exercised within ten years of the date they
were granted (five years in the case of a significant stockholder). </font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">As of September
30, 2003, there were options outstanding covering 892,974 shares of common stock
under the 2002 Plan. Shares subject to options under the 1997 Stock Option Plan
or the 2002 Plan that expire, are cancelled or terminated without being
exercised, become available for future grants under the 2002 Plan. Accordingly,
there were 719,025 shares available for future option grants under the 2002 Plan
at September 30, 2003.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><u><font size="2">1997 Employee
Stock Compensation Plan (&#147;ESC&#1;)</font></u></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">Effective March
10, 1997, the Company adopted the 1997 Employee Stock Compensation Plan (&#147;ESC
Plan&#148;), which expired March 9, 2002, as amended. The plan was amended on
February 22, 2000 reserving for issuance of an aggregate of 650,000 shares of
common stock. The Plan provided for compensation awards of the Company&#146;s common
stock to non-executive employees (as defined), at the discretion of the ESC Plan
committee. </font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">During fiscal year
ended 2002, the Company issued 24,129 shares of common stock under the ESC Plan
and recorded general and administrative expense of $94,920 for awards valued at
the estimated fair market value ranging from $2.29 to $4.12 per common share.
For fiscal year ended 2001, the Company issued 36,093 shares of common stock
under the ESC Plan recording general and administrative expense of $136,020 for
awards valued at an estimated fair market value ranging from $2.50 to $4.79 per
common share.</font></p>

<p align="center"><font face="Times New Roman" size="2">F-19</font></p>
<hr size="3" color="#C0C0C0">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
<p>&nbsp;</p>

<p style="page-break-before:always"><a href="#TABLE OF CONTENTS"><font size="1">
TABLE OF CONTENTS</font></a></p>

<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td width="60%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><b><font size="2">American
    Technology Corporation</font></b><br>
    <b><font size="2">Notes to the Financial Statements</font></b></td>
  </tr>
  <tr>
    <td valign="bottom">
    <div style="border:none;border-bottom:solid .05em;padding:0in 0in 1.0pt 0in">
      <div style="border:none;border-bottom:solid .25em;padding:0in 0in 1.0pt 0in">
      </div>
    </div>
    </td>
  </tr>
</table>
<p style=" margin-bottom:0pt; margin-top:8pt;"><u><font size="2">1997 Stock
Option Plan </font></u></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The Company&#146;s 1997
Stock Option Plan (&#147;1997 Plan&#148;) reserved for issuance 1,000,000 shares of the
Company&#146;s common stock. The Board terminated the 1997 Plan with respect to new
grants on August 1, 2002. The 1997 Plan remains in effect for grants prior to
that date. Any options granted under the 1997 Plan must be exercised within ten
years of the date they were granted (five years in the case of a significant
stockholder). As of September 30, 2003, there were options outstanding covering
541,800 shares of common stock under this Plan.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><u><font size="2">Other Stock
Options</font></u></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">During the fiscal
year ended September 30, 2002, the Company granted to two employees an aggregate
of 200,000 stock options exercisable at $4.50 per share until April 25, 2006.
For the fiscal year ended September 30, 2001, the Company granted to the Board
of Directors an aggregate of 140,000 stock options exercisable at $3.62 per
share until November 2005. As of September 30, 2003 there were options remaining
outstanding covering 202,500 shares of common stock.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><u><font size="2">Non-Cash
Compensation Expense</font></u></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">During the fiscal
year ended September 30, 2003, the Company recorded non-cash compensation
expense of $25,597 for the granting of 13,000 options under its stock options
plans to non-employees. For the fiscal year ended September 30, 2002, the
Company recorded non-cash compensation expense of $115,199 for the granting of
55,000 options under its stock options plans to non-employees. For fiscal 2001,
the Company recorded non-cash compensation expense of $20,924, for the granting
of 20,000 options under its stock options plans to non-employees.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">In October 2001,
the Company granted a total of 110,000 stock options to a consultant under the
1997 Plan in conjunction with related development and manufacturing agreements.
Options to purchase 65,000 shares of common stock vest depending on project
milestones. The Company estimated the period required to complete the specified
milestones each reporting period and recorded consulting expense based on the
market price of the Company&#146;s stock and the estimated percentage of the work
completed. Consulting expense was adjusted each reporting period until vesting
occurs. The Company recorded consulting expense of $87,179 for the Black Scholes
value of 30,000 milestone options vested in fiscal 2002 and consulting expense
of $47,782 for the Black Scholes value of 10,000 milestone options vested in
fiscal 2003. Options to purchase 45,000 shares of common stock vest based on the
consultant meeting certain performance criteria. The Company records consulting
expense at each vesting date. The Company also recorded consulting expense of
$96,655 for the Black Scholes value of 45,000 performance options vested during
the year ended September 30, 2002.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">On September 30,
2002 the Company granted a warrant exercisable for 100,000 common shares at
$4.25 per share to a consultant for consulting services. The Company recorded
non-cash consulting expense of $218,803 for the value of these warrants.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">On April 8, 2003
the Company granted a warrant exercisable for 50,000 common shares at $3.63 per
share to a consultant for consulting services. The Company recorded non-cash
consulting expense of $106,616 for the value of these warrants.</font></p>
<p><br>
</p>
<p style="margin-bottom:0pt;text-align:center"><font size="2">F-20</font></p>
<p><br>
</p>
<hr noshade align="center" width="100%" size="2">
<p style="page-break-before:always"><a href="#TABLE OF CONTENTS"><font size="1">
TABLE OF CONTENTS</font></a></p>

<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td width="60%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><b><font size="2">American
    Technology Corporation</font></b><br>
    <b><font size="2">Notes to the Financial Statements</font></b></td>
  </tr>
  <tr>
    <td valign="bottom">
    <div style="border:none;border-bottom:solid .05em;padding:0in 0in 1.0pt 0in">
      <div style="border:none;border-bottom:solid .25em;padding:0in 0in 1.0pt 0in">
      </div>
    </div>
    </td>
  </tr>
</table>
<p style=" margin-bottom:0pt; margin-top:8pt;"><u><font size="2">Stock Option
Summary Information</font></u></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">A summary of the
status of the Company&#146;s stock option plans as of September 30, 2003, 2002 and
2001 and the changes during the years ended on those dates is presented below:</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;">&nbsp;</p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="15" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="57" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Number</font></b></td>
    <td width="19" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Weighted</font></b><br>
    <b><font size="1">Average</font></b></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="15" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="19" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #FFFFFF; ">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <b><font size="2">Fiscal 2001:</font></b></td>
    <td width="15" valign="bottom" style="background: #FFFFFF; "><font size="1">&nbsp;</font></td>
    <td width="57" valign="bottom" style="background: #FFFFFF; ">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #FFFFFF; "><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #FFFFFF; ">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="43" valign="bottom" style="background: #FFFFFF; ">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Outstanding October 1, 2000</font></td>
    <td width="15" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="57" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">1,153,833</font></td>
    <td width="19" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="43" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">5.20</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:25.9pt;text-indent:-8.65pt;">
    <font size="2">Granted</font></td>
    <td width="15" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="57" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">660,000</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="43" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3.21</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:25.9pt;text-indent:-8.65pt;">
    <font size="2">Canceled/expired</font></td>
    <td width="15" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="57" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(160,633</font></td>
    <td width="19" valign="bottom"><font size="2">)</font></td>
    <td width="9" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="43" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">6.09</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:25.9pt;text-indent:-8.65pt;">
    <font size="2">Exercised</font></td>
    <td width="15" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="57" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(315,000</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="43" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">0.71</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="15" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="19" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Outstanding September 30, 2001</font></td>
    <td width="15" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="57" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">1,338,200</font></td>
    <td width="19" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="43" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">2.23</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="15" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="19" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Exercisable at September 30, 2001</font></td>
    <td width="15" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="57" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">809,450</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="43" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">2.18</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="15" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="19" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="1">&nbsp;</font></td>
    <td width="15" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="57" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="43" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Weighted average fair value of options granted during the
    year</font></td>
    <td width="15" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="57" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="43" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">1.67 </font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="15" valign="top"><font size="1">&nbsp;</font></td>
    <td width="57" valign="top"><font size="1">&nbsp;</font></td>
    <td width="19" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
  </tr>
  <tr>
    <td valign="bottom" bgcolor="#EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="1">&nbsp;</font></td>
    <td width="15" valign="bottom" bgcolor="#EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="57" valign="bottom" bgcolor="#EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" bgcolor="#EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" bgcolor="#EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="43" valign="bottom" bgcolor="#EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #FFFFFF; ">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <b><font size="2">Fiscal 2002:</font></b></td>
    <td width="15" valign="bottom" style="background: #FFFFFF; "><font size="1">&nbsp;</font></td>
    <td width="57" valign="bottom" style="background: #FFFFFF; ">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #FFFFFF; "><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #FFFFFF; ">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="43" valign="bottom" style="background: #FFFFFF; ">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Outstanding October 1, 2001</font></td>
    <td width="15" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="57" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">1,338,200</font></td>
    <td width="19" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="43" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">2.23</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:25.9pt;text-indent:-8.65pt;">
    <font size="2">Granted</font></td>
    <td width="15" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="57" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">510,000</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="43" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3.97</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:25.9pt;text-indent:-8.65pt;">
    <font size="2">Canceled/expired</font></td>
    <td width="15" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="57" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(382,775</font></td>
    <td width="19" valign="bottom"><font size="2">)</font></td>
    <td width="9" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="43" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">8.17</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:25.9pt;text-indent:-8.65pt;">
    <font size="2">Exercised</font></td>
    <td width="15" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="57" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(6,250</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="43" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3.00</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="15" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="19" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Outstanding September 30, 2002</font></td>
    <td width="15" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="57" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">1,459,175</font></td>
    <td width="19" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="43" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3.97</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="15" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="19" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Exercisable at September 30, 2002</font></td>
    <td width="15" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="57" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">1,090,575</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="43" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3.93</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="15" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="19" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="1">&nbsp;</font></td>
    <td width="15" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="57" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="43" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Weighted average fair value of options granted during the
    year</font></td>
    <td width="15" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="57" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="43" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">1.37</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="15" valign="top"><font size="1">&nbsp;</font></td>
    <td width="57" valign="top"><font size="1">&nbsp;</font></td>
    <td width="19" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
  </tr>
  <tr>
    <td valign="bottom" bgcolor="#EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="1">&nbsp;</font></td>
    <td width="15" valign="bottom" bgcolor="#EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="57" valign="bottom" bgcolor="#EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" bgcolor="#EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" bgcolor="#EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="43" valign="bottom" bgcolor="#EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #FFFFFF; ">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <b><font size="2">Fiscal 2003:</font></b></td>
    <td width="15" valign="bottom" style="background: #FFFFFF; "><font size="1">&nbsp;</font></td>
    <td width="57" valign="bottom" style="background: #FFFFFF; ">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom" style="background: #FFFFFF; "><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #FFFFFF; ">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="43" valign="bottom" style="background: #FFFFFF; ">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Outstanding October 1, 2002</font></td>
    <td width="15" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="57" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">1,459,175</font></td>
    <td width="19" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="43" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3.97</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:25.9pt;text-indent:-8.65pt;">
    <font size="2">Granted</font></td>
    <td width="15" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="57" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">979,000</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="43" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3.96</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:25.9pt;text-indent:-8.65pt;">
    <font size="2">Canceled/expired</font></td>
    <td width="15" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="57" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(416,950</font></td>
    <td width="19" valign="bottom"><font size="2">)</font></td>
    <td width="9" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="43" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3.86</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:25.9pt;text-indent:-8.65pt;">
    <font size="2">Exercised</font></td>
    <td width="15" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="57" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(408,951</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="43" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3.95</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="15" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="19" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Outstanding September 30, 2003</font></td>
    <td width="15" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="57" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">1,612,274</font></td>
    <td width="19" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="43" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">4.00</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="15" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="19" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Exercisable at September 30, 2003</font></td>
    <td width="15" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="57" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">998,722</font></td>
    <td width="19" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="43" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3.79</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="15" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="19" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="1">&nbsp;</font></td>
    <td width="15" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="57" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="43" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Weighted average fair value of options granted during the
    year</font></td>
    <td width="15" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="57" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="19" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="9" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="43" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">1.78</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="15" valign="top"><font size="1">&nbsp;</font></td>
    <td width="57" valign="top"><font size="1">&nbsp;</font></td>
    <td width="19" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
  </tr>
</table>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The following
table summarizes information about stock options outstanding at September 30,
2003:</font></p>
<p style=" margin-bottom:0pt; margin-top:0pt;"><font size="2">&nbsp;&nbsp;</font></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="margin-left:5.4pt; border-collapse:collapse">
  <tr>
    <td width="18%" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Range of</font></b><br>
    <b><font size="1">Exercise</font></b><br>
    <b><font size="1">Price</font></b></td>
    <td valign="bottom">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="13%" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Number</font></b><br>
    <b><font size="1">Outstanding</font></b></td>
    <td valign="bottom">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="19%" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Weighted Average</font></b><br>
    <b><font size="1">Remaining </font></b><br>
    <b><font size="1">Contractual</font></b><br>
    <b><font size="1">Life</font></b></td>
    <td valign="bottom">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Weighted</font></b><br>
    <b><font size="1">Average</font></b><br>
    <b><font size="1">Exercise</font></b><br>
    <b><font size="1">Price</font></b></td>
    <td valign="bottom">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="12%" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Number</font></b><br>
    <b><font size="1">Exercisable</font></b></td>
    <td valign="bottom">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Weighted</font></b><br>
    <b><font size="1">Average</font></b><br>
    <b><font size="1">Exercise</font></b><br>
    <b><font size="1">Prices</font></b></td>
    <td valign="bottom">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td width="18%" align="center" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:center;">
    <font size="2">$2.50 - $3.62</font></td>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="13%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">1,078,874</font></td>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="19%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3.31</font></td>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3.17</font></td>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="12%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">697,696</font></td>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3.11</font></td>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td width="18%" align="center" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:center;">
    <font size="2">$4.00 - $4.50</font></td>
    <td valign="bottom">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="13%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">173,500</font></td>
    <td valign="bottom">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="19%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">2.94</font></td>
    <td valign="bottom">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">4.43</font></td>
    <td valign="bottom">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="12%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">128,438</font></td>
    <td valign="bottom">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">4.40</font></td>
    <td valign="bottom">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td width="18%" align="center" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:center;">
    <font size="2">$5.00 - $6.38</font></td>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="13%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">246,600</font></td>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="19%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">2.72</font></td>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">5.62</font></td>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="12%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">134,288</font></td>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">5.34</font></td>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td width="18%" align="center" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:center;">
    <font size="2">$7.25 - $9.03</font></td>
    <td valign="bottom">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="13%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">113,300</font></td>
    <td valign="bottom">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="19%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3.53</font></td>
    <td valign="bottom">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">7.70</font></td>
    <td valign="bottom">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="12%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">38,300</font></td>
    <td valign="bottom">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">8.58</font></td>
    <td valign="bottom">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td align="center" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td width="18%" align="center" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:center;">
    <font size="2">$2.50 - $9.03</font></td>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="13%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">1,612,274</font></td>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="19%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3.20</font></td>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">4.00</font></td>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="12%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">998,722</font></td>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3.79</font></td>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:0pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td align="center" valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top"><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p style=" margin-bottom:0pt; margin-top:8pt;">&nbsp;</p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><u><font size="2">Employee
Benefit - 401K Plan</font></u></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">On January 1,
1998, the Company established a 401(k) plan covering its employees. The plan
originated service effectively in June 1998. Matching contributions are made on
behalf of all participants at the discretion of the Board of Directors. During
the fiscal years ended September 30, 2003, 2002 and 2001, the Company made
matching contributions of approximately $18,675, $20,151 and $18,539
respectively.</font></p>

<p align="center"><font face="Times New Roman" size="2">F-21</font></p>
<hr size="3" color="#C0C0C0">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
<p>&nbsp;</p>

<p style="page-break-before:always"><a href="#TABLE OF CONTENTS"><font size="1">
TABLE OF CONTENTS</font></a></p>

<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td width="60%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><b><font size="2">American
    Technology Corporation</font></b><br>
    <b><font size="2">Notes to the Financial Statements</font></b></td>
  </tr>
  <tr>
    <td valign="bottom">
    <div style="border:none;border-bottom:solid .05em;padding:0in 0in 1.0pt 0in">
      <div style="border:none;border-bottom:solid .25em;padding:0in 0in 1.0pt 0in">
      </div>
    </div>
    </td>
  </tr>
</table>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font size="2">8. COMMITMENTS
AND CONTINGENCIES</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><u><font size="2">Facility Leases</font></u></p>
<p class="MsoNormal"><font size="2">The Company&#146;s executive offices, research
and development and operational facilities in San Diego, California, were
occupied under a lease which expired in July 2003.&nbsp; The Company continues to
occupy this space on a month to month basis. The Company is in the process of
negotiating an amendment of its lease agreement to extend the term through July
2006. The Company occupies approximately 23,500 square feet of office,
laboratory, production and warehouse space in these premises with aggregate
monthly payments of approximately $16,000, exclusive of utilities and costs.
This monthly rent is expected to increase to approximately $28,200 per month
upon execution of the lease amendment. </font></p>
<p class="MsoNormal"><font size="2">The Company rents on a monthly basis office
space utilized for development and production of its NeoPlanar technology in
Carson City, Nevada. The Company occupies approximately 2,200 square feet with a
monthly payment of $1,210 excluding utilities.</font></p>
<p><font size="2">The Company&#146;s east
coast office for its Government Group is located in Topsham, Maine. The Company
has a one year lease expiring in August 2004 for 600 square feet of office space
with a monthly payment of $919.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">Facility rent
expense recorded by the Company for the years ended September 30, 2003, 2002 and
2001 was $194,025, $185,742 and $178,457, respectively. </font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><u><font size="2">Operating
Leases</font></u></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The Company has
one automobile lease obligation with a term of 39 months. The lease will expire
as of May 2006. The Company has one business equipment lease with a term of 60
months expiring as of September 2007. These leases are reported as operating
leases within the financial statements. The obligations under these leases are
as follows:</font></p>
<p style=" margin-bottom:0pt; margin-top:0pt;"><font size="2">&nbsp;</font></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="margin-left:0pt; border-collapse:collapse">
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><b><font size="1">Year ending
    September 30:</font></b></td>
    <td width="2%" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="4%" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" colspan="5">
    <hr noshade width="100%" color="gray" size="1">
    </td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">2004</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="4%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;margin-left:-4.0pt;text-indent:4.0pt;">
    <font size="2">16,600</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">2005</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="4%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">16,600</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">2006</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="4%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">11,276</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">2007</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="4%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">5,952</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p style=" margin-bottom:0pt; margin-top:8pt;">&nbsp;</p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><u><font size="2">Employment
Agreements</font></u></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The Company has
employment agreements with one executive officer and two key employees. The
executive officer agreement&#146;s original term has expired and is on a month to
month basis. The two key employee agreements expire in September 2004 and 2006.
The minimum annual salaries under the two agreements with remaining terms is
$232,000 per year in the aggregate. One agreement provides for up to nine months
severance for certain terminations.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><u><font size="2">Litigation</font></u></p>
<p><font size="2">In September 2003, the
Company filed a complaint against eSOUNDideas, Inc., in the Superior Court of
California, County of San Diego, alleging breach of contract and seeking a
declaratory judgement to the effect that a License, Purchase and Marketing
Agreement dated September 28, 2000 (the &#147;ESI License Agreement&#148;) with
eSOUNDideas, a California partnership, was properly terminated in May 2003. The
principals of eSOUNDideas are Greg O. Endsley and Douglas J. Paschall.&nbsp; The
principals also founded a corporation, eSOUNDideas, Inc., which purported to
assume the contractual obligations of eSOUNDideas.&nbsp; The Company amended the
complaint in November 2003 to include eSOUNDideas (the general partnership), Mr.
Endsley and Mr. Paschall as defendants.&nbsp; For convenience, the following
discussion refers to eSOUNDideas and eSOUNDideas, Inc. collectively as &#147;ESI.&#148;&nbsp;
In November 2003, the Company filed complaints in the Superior Court of
California, County of San Diego, against Mr. Endsley and Paschall seeking
declaratory judgments that options granted to each of Mr. Endsley and Mr.
Paschall in April 2001 were terminated in October 2002.</font></p>
<p><font size="2">The ESI License
Agreement formerly appointed ESI as an exclusive distributor of HSS products
specifically targeted to the point of sale/purchase, kiosk and display, and the
event, trade show and exhibit markets in North America for five years.&nbsp; In June
2002, the Company and ESI purported to enter into an amendment to the ESI
License Agreement, extending the term to ten years commencing on the first
delivery of a commercial HSS product to an end user, and eliminating minimum
purchase requirements for the first three years. The Company believes the
amendment was invalid as it was given in consideration for a large order from
ESI which was later withdrawn by ESI due to a dispute over the payment and
delivery terms of such order. In May 2003, the Company gave notice to ESI of
termination of the ESI License Agreement. The Company based its termination on
its belief that ESI had failed to fulfill certain covenants contained in the ESI
License Agreement related to efforts and resources required to maximize the
distribution and sales of HSS products in its product categories.&nbsp; Under the
terms of the ESI License Agreement, the termination was effective immediately,
but ESI had sixty days to cure conditions giving rise to termination and
reinstate the agreement.&nbsp; ESI did not tender a cure within such sixty day
period.</font></p>
<p><br>
</p>
<p style="margin-bottom:0pt;text-align:center"><font size="2">F-22</font></p>
<p><br>
</p>
<hr noshade align="center" width="100%" size="2">
<p style="page-break-before:always"><a href="#TABLE OF CONTENTS"><font size="1">
TABLE OF CONTENTS</font></a></p>

<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td width="60%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><b><font size="2">American
    Technology Corporation</font></b><br>
    <b><font size="2">Notes to the Financial Statements</font></b></td>
  </tr>
  <tr>
    <td valign="bottom">
    <div style="border:none;border-bottom:solid .05em;padding:0in 0in 1.0pt 0in">
      <div style="border:none;border-bottom:solid .25em;padding:0in 0in 1.0pt 0in">
      </div>
    </div>
    </td>
  </tr>
</table>
<p><font size="2">The defendants in these
cases have filed a cross-complaint against the Company alleging breach of
contract in connection with the ESI License Agreement and the stock options
granted to Mr. Endsley and Mr. Paschall, breach of the implied covenant of good
faith and fair dealing, intentional interference with contract, negligent
interference with contract, intentional interference with prospective economic
advantage, negligent interference with prospective economic advantage,
defamation, fraud, and violation of California Business and Professions Code
&sect;17200.&nbsp; The defendants seek actual and punitive damages in unstated amounts and
other relief.</font></p>
<p><font size="2">The Company intends to
vigorously pursue its complaints against the defendants in these cases, and to
vigorously challenge the defendants&#146; cross-complaint.</font></p>
<p><font size="2">Related to the Company&#146;s
April 2000 purchase of the NeoPlanar speaker technology, the Company has been in
dispute with a predecessor owner of the technology regarding a minimum film
royalty for 2002 of approximately $228,000. The Company agreed to arbitrate the
dispute in front of a single arbitrator in Seattle, Washington.&nbsp; The technology
purchase agreement required a minimum royalty in 2002 to maintain exclusive film
supply. The Company believes the minimum royalty for 2002 was not due and film
exclusivity was terminated. In September 2003 the Company accrued $292,500 as
the estimated cost to settle this matter and to buyout all future per unit film
royalties. In December 2003 the Company reached a non-binding agreement to
settle this matter for a payment of $25,000 and the issuance of 50,000 shares of
common stock. However, the definitive documentation for this settlement is still
under negotiation and the dispute may not therefore settle on the foregoing
terms.</font></p>
<p><font size="2">In August 2003
the Company reached an agreement and in September 2003 the Company settled
litigation related to the termination of an outside contract manufacturer,
Horizon Sports Technologies, Inc. d/b/a HST. As part of the settlement the
Company acquired raw materials and equipment for production valued at
approximately $145,000. The Company paid settlement costs of $313,000 and
recorded additional settlement costs for the $585,000 value assigned to 100,000
shares of common stock issued to HST. As part of the settlement, HST also
entered into a nonexclusive royalty-bearing license to manufacture and sell
speakers based on the Company&#146;s Stratified Field technology and PureBass
subwoofer technology and the Company transferred to HST tooling valued at
approximately $43,000.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The Company may at
times be involved in litigation in the ordinary course of business. Except as
set forth above, there are no pending material legal proceedings to which the
Company is a party or to which any of its property is subject.</font></p>
<p><u><font size="2">Royalties</font></u></p>
<p><font size="2">The Company is
obligated to pay a $2.50 per unit royalty on one electronic component for its
HSS product. The Company is also obligated to pay an officer and director a 2%
royalty on net sales from certain of its technologies, of which only HSS is a
current offering of the Company. The royalty obligation continues until at least
March 1, 2007, and for any longer period during which the Company sells products
or licenses technologies subject to any patent assigned to it by the
officer/director. No royalties were paid under this agreement in the fiscal
years ended September 30, 2003 or 2002, as such royalties were waived by the
officer/director. The Company may owe royalties in future periods based on
actual sales or technology revenues.</font></p>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font size="2">9. WARRANTY
LIABILITIES</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">Details of the
estimated warranty liability are as follows:</font></p>
<p style=" margin-bottom:0pt; margin-top:0pt;"><font size="2">&nbsp;</font></p>
<table width="676" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td valign="bottom" width="548">
    <p style="margin-top:2pt;margin-bottom:0pt;"><b><font size="1">Fiscal Year
    Ending September 30:</font></b></td>
    <td width="13" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom" width="50">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">2003</font></b></td>
    <td width="13" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom" width="44">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">2002</font></b></td>
    <td width="8" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top" width="548">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="13" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top" width="50">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="13" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top" width="44">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="8" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8" width="548">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Beginning balance</font></td>
    <td width="13" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="39" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">6,313</font></td>
    <td width="13" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="13" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:justify;">
    <font size="2">$</font></td>
    <td width="31" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">6,313</font></td>
    <td width="8" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" width="548">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Warranty provision</font></td>
    <td width="13" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="39" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">313,187</font></td>
    <td width="13" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="13" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:justify;">
    <font size="1">&nbsp;</font></td>
    <td width="31" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="8" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8" width="548">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Warranty payments</font></td>
    <td width="13" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="39" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="13" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="13" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:justify;">
    <font size="1">&nbsp;</font></td>
    <td width="31" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="8" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top" width="548"><font size="1">&nbsp;</font></td>
    <td width="13" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top" width="11">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top" width="39">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="13" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top" width="13">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top" width="31">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="8" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" width="548">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Ending balance</font></td>
    <td width="13" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="39" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">319,500</font></td>
    <td width="13" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="13" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;text-align:justify;">
    <font size="2">$</font></td>
    <td width="31" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">6,313</font></td>
    <td width="8" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top" width="548"><font size="1">&nbsp;</font></td>
    <td width="13" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top" width="11">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top" width="39">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="13" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top" width="13">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top" width="31">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="8" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">Due to performance
failures of some of the Company&#146;s first generation of HSS speaker systems
resulting primarily from failure of an emitter component, the Company expects to
replace emitters on approximately 700 Generation I HSS units. At September 30,
2003 a total of $275,000 of the warranty reserve was scheduled for this
replacement program.</font></p>
<p><br>
</p>
<p style="margin-bottom:0pt;text-align:center"><font size="2">F-23</font></p>
<p><br>
</p>
<hr noshade align="center" width="100%" size="2">
<p style="page-break-before:always"><a href="#TABLE OF CONTENTS"><font size="1">
TABLE OF CONTENTS</font></a></p>

<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td width="60%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><b><font size="2">American
    Technology Corporation</font></b><br>
    <b><font size="2">Notes to the Financial Statements</font></b></td>
  </tr>
  <tr>
    <td valign="bottom">
    <div style="border:none;border-bottom:solid .05em;padding:0in 0in 1.0pt 0in">
      <div style="border:none;border-bottom:solid .25em;padding:0in 0in 1.0pt 0in">
      </div>
    </div>
    </td>
  </tr>
</table>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font size="2">10. EQUIPMENT
UNDER CAPITAL LEASE</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">On October 1,
2001, the Company entered into a capital lease obligation for the purchase of
a&nbsp;phone system. The lease expires September 11, 2006 and bears interest at
10.1%, with monthly principal and interest payments of $1,067. Future minimum
lease payments and the present value of the minimum lease payments under the
noncancelable lease obligation as of September 30, 2003 are as follows:</font></p>
<p style=" margin-bottom:0pt; margin-top:0pt;"><font size="2">&nbsp;</font></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><b><font size="1">Year ending
    September 30:</font></b></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" colspan="4">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">2004</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="4%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;margin-left:-16.15pt;">
    <font size="2">12,806</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">2005</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="4%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">12,806</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">2006</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="4%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">12,806</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Total:</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="4%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">38,418</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Total future minimum lease payments </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="4%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">38,418</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Less amounts representing interest</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="4%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(5,406</font></td>
    <td width="1%" valign="bottom"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Present value of minimum lease payments </font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="4%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">33,012</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Less current maturities</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="4%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(9,915</font></td>
    <td width="1%" valign="bottom"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;">
    <font size="2">Total long-term obligations</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="4%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">23,097</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p><br>
</p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">At September 30,
2003, property and equipment includes equipment under capital lease obligations
with a total cost of $50,041 and accumulated amortization of $20,016.</font></p>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font size="2">11. MAJOR
CUSTOMERS</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">For the fiscal
year ended September 30, 2003, revenues from one individual customer accounted
for 24% of total revenue. No other customer accounted for more than 10% of
revenue. For the fiscal year ended September 30, 2002, revenues from three
individual customers accounted for 19%, 12% and 11% of total revenue. For the
fiscal year ended September 30, 2001, revenues from two individual customers
accounted for 23% and 10% of total revenue.</font></p>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font size="2">12. SUPPLIER
AGREEMENTS</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">During fiscal 2001
and 2002, the Company had relationships with a number of high quality, low-cost
foreign manufacturers who provided the Company with a diverse line of consumer
electronic products. In fiscal 2003 the Company reduced its marketing emphasis
on portable consumer products in order to focus financial, personnel and
facility resources on sound technologies.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The Company is
reliant on one supplier for film for its HSS product and is making efforts to
obtain alternative suppliers to reduce its reliance thereon. The Company could
be materially impacted if it loses its current film supplier and is unable to
find an alternative supplier.</font></p>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font size="2">13. RELATED
PARTY TRANSACTIONS</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">In September&nbsp;2001,
a family trust for which Mr.&nbsp;Elwood G. Norris, Chairman of the Company serves as
trustee purchased $250,000 in principal amount of the Company&#146;s 12% Convertible
Subordinated Promissory Notes, and in connection with such purchase, received a
warrant to purchase 125,000 shares of Common Stock. The purchase by such trust
was on the same terms as those offered to the other purchasers in the same
financing. In November&nbsp;2002, the Company and a majority of the holders of such
notes agreed to extend the maturity date of the notes, including the note held
by Mr.&nbsp;Norris&#146; trust, from December&nbsp;31, 2002 to December&nbsp;31, 2003.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">On April 19, 2002,
the Company offered to shareholders and employees the opportunity to purchase
limited edition NeoPlanar Speaker Systems with Purebass Subwoofers. During
fiscal 2002 a total of 45 systems were sold for cash receipts of $44,077.</font></p>
<p><br>
</p>
<p style="margin-bottom:0pt;text-align:center"><font size="2">F-24</font></p>
<p><br>
</p>
<hr noshade align="center" width="100%" size="2">
<p style="page-break-before:always"><a href="#TABLE OF CONTENTS"><font size="1">
TABLE OF CONTENTS</font></a></p>

<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td width="60%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><b><font size="2">American
    Technology Corporation</font></b><br>
    <b><font size="2">Notes to the Financial Statements</font></b></td>
  </tr>
  <tr>
    <td valign="bottom">
    <div style="border:none;border-bottom:solid .05em;padding:0in 0in 1.0pt 0in">
      <div style="border:none;border-bottom:solid .25em;padding:0in 0in 1.0pt 0in">
      </div>
    </div>
    </td>
  </tr>
</table>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font size="2">14. BUSINESS
SEGMENT DATA</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The Company is
engaged in design, development and commercialization of sound, acoustic and
other technologies. In the fourth quarter of fiscal 2003 the Company organized
operations into two segments by the end-user markets they serve. The Company&#146;s
reportable segments are strategic business units that sell the Company&#146;s
products to distinct distribution channels. The Business Products and Licensing
Group (Business Group) licenses and markets HSS, NeoPlanar and Purebass speakers
to companies that employ audio in consumer, commercial and professional
applications. The Government and Force Protection Systems Group (Government
Group) markets LRAD, NeoPlanar and HSS products to government and military
customers and to the expanding force protection market. The segments are managed
separately because each segment requires different selling and marketing
strategies as the class of customers within each segment is different.</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The accounting
policies of the segments are the same as those described in the summary of
significant accounting policies. The Company does not allocate operating
expenses or assets between its two reportable segments. Accordingly the measure
of profit for each reportable segment is based on gross profit. Although the
segments became separately managed only in the last quarter of fiscal 2003, the
Company has segmented historical operations for comparable customers for
comparison.</font></p>
<p style=" margin-bottom:0pt; margin-top:0pt;"><font size="2">&nbsp;</font></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><b><font size="1">Years Ended
    September 30,</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="10%" colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">2003</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">2002</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">2001</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #FFFFFF; ">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">Revenues:</font></td>
    <td width="2%" valign="bottom" style="background: #FFFFFF; "><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #FFFFFF; ">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom" style="background: #FFFFFF; ">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom" style="background: #FFFFFF; "><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #FFFFFF; ">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom" style="background: #FFFFFF; ">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom" style="background: #FFFFFF; "><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #FFFFFF; ">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #FFFFFF; ">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom" style="background: #FFFFFF; "><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Business Group</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">861,091</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">922,542</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">855,342</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Government Group</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">454,335</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">88,210</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;margin-right:.7pt;">
    <font size="2">1,315,426</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">1,010,752</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">855,342</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #FFFFFF; ">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">Gross Profit (Loss):</font></td>
    <td width="2%" valign="bottom" style="background: #FFFFFF; "><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #FFFFFF; ">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom" style="background: #FFFFFF; ">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom" style="background: #FFFFFF; "><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #FFFFFF; ">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom" style="background: #FFFFFF; ">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom" style="background: #FFFFFF; "><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #FFFFFF; ">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #FFFFFF; ">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom" style="background: #FFFFFF; "><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Business Group</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(501,748</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">256,779 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">277,066</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Government Group</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">273,097 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">70,129 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(228,651</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">326,908</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">277,066 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p><br>
</p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The following
table summarizes revenues by geographic region. Revenues are attributed to
countries based on location of customer. There were no material foreign sales in
fiscal 2002 and 2001.</font></p>
<p style=" margin-bottom:0pt; margin-top:0pt;"><font size="2">&nbsp;</font></p>
<table align="center" width="65%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td width="46%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><b><font size="1">Year Ended
    September 30,</font></b></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11%" colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">2003</font></b></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td width="46%" valign="bottom" style="background: #FFFFFF; ">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">Revenues:</font></td>
    <td width="1%" valign="bottom" style="background: #FFFFFF; "><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #FFFFFF; ">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #FFFFFF; ">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #FFFFFF; "><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td width="46%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">United States</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="2">$</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">1,167,120</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td width="46%" valign="bottom" style="background: #EAF9E8">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Other</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="9%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">148,306</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td width="46%" valign="top"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td width="46%" valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="9%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">1,315,426</font></td>
    <td width="1%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td width="46%" valign="top"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="3">
    </td>
    <td width="1%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p><br>
</p>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font size="2">15.
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION</font></b></p>
<p style=" margin-bottom:0pt; margin-top:0pt;"><font size="2">&nbsp;</font></p>
<table width="671" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td valign="bottom" width="448">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Year ended September 30, </font></b></td>
    <td width="13" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom" width="59">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">2003</font></b></td>
    <td width="14" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom" width="59">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">2002</font></b></td>
    <td width="13" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom" width="52">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">2001</font></b></td>
    <td width="13" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top" width="448">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="13" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top" width="59">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="14" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top" width="59">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="13" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top" width="52">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="13" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #FFFFFF; " width="448">
    <font size="2">Supplemental Information:</font></td>
    <td width="13" valign="bottom" style="background: #FFFFFF; ">&nbsp;</td>
    <td width="6" valign="bottom" style="background: #FFFFFF; ">
    &nbsp;</td>
    <td width="53" valign="bottom" style="background: #FFFFFF; ">
    &nbsp;</td>
    <td width="14" valign="bottom" style="background: #FFFFFF; ">&nbsp;</td>
    <td width="6" valign="bottom" style="background: #FFFFFF; ">
    &nbsp;</td>
    <td width="53" valign="bottom" style="background: #FFFFFF; ">
    &nbsp;</td>
    <td width="13" valign="bottom" style="background: #FFFFFF; ">&nbsp;</td>
    <td width="6" valign="bottom" style="background: #FFFFFF; ">
    &nbsp;</td>
    <td width="46" valign="bottom" style="background: #FFFFFF; ">
    &nbsp;</td>
    <td width="13" valign="bottom" style="background: #FFFFFF; ">&nbsp;</td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8" width="448">
    <font size="2">&nbsp;&nbsp;&nbsp;&nbsp;Cash paid for interest</font></td>
    <td width="13" valign="bottom" style="background: #EAF9E8">&nbsp;</td>
    <td width="6" valign="bottom" style="background: #EAF9E8">
    <font size="2">$</font></td>
    <td width="53" valign="bottom" style="background: #EAF9E8">
    <p align="right"><font size="2">111,886</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8">&nbsp;</td>
    <td width="6" valign="bottom" style="background: #EAF9E8">
    <p align="right"><font size="2">$</font></td>
    <td width="53" valign="bottom" style="background: #EAF9E8">
    <p align="right"><font size="2">12,265</font></td>
    <td width="13" valign="bottom" style="background: #EAF9E8">&nbsp;</td>
    <td width="6" valign="bottom" style="background: #EAF9E8">
    <p align="right"><font size="2">$</font></td>
    <td width="46" valign="bottom" style="background: #EAF9E8">
    <p align="right">
    <font size="2">&#151;</font></td>
    <td width="13" valign="bottom" style="background: #EAF9E8">&nbsp;</td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #FFFFFF; " width="448">
    <font size="2">&nbsp;&nbsp;&nbsp;&nbsp;Cash paid for taxes</font></td>
    <td width="13" valign="bottom" style="background: #FFFFFF; ">&nbsp;</td>
    <td width="6" valign="bottom" style="background: #FFFFFF; ">
    <font size="2">$</font></td>
    <td width="53" valign="bottom" style="background: #FFFFFF; ">
    <p align="right"><font size="2">2,467</font></td>
    <td width="14" valign="bottom" style="background: #FFFFFF; ">
    <p align="right">&nbsp;</td>
    <td width="6" valign="bottom" style="background: #FFFFFF; ">
    <font size="2">$</font></td>
    <td width="53" valign="bottom" style="background: #FFFFFF; ">
    <p align="right"><font size="2">800</font></td>
    <td width="13" valign="bottom" style="background: #FFFFFF; ">&nbsp;</td>
    <td width="6" valign="bottom" style="background: #FFFFFF; ">
    <p align="right"><font size="2">$</font></td>
    <td width="46" valign="bottom" style="background: #FFFFFF; ">
    <p align="right"><font size="2">800</font></td>
    <td width="13" valign="bottom" style="background: #FFFFFF; ">&nbsp;</td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #FFFFFF; " width="448">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">Non-cash financing activities:</font></td>
    <td width="13" valign="bottom" style="background: #FFFFFF; "><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom" style="background: #FFFFFF; ">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="53" valign="bottom" style="background: #FFFFFF; ">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="14" valign="bottom" style="background: #FFFFFF; "><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom" style="background: #FFFFFF; ">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="53" valign="bottom" style="background: #FFFFFF; ">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="13" valign="bottom" style="background: #FFFFFF; "><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom" style="background: #FFFFFF; ">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="46" valign="bottom" style="background: #FFFFFF; ">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="13" valign="bottom" style="background: #FFFFFF; "><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" width="448">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Senior notes applied to warrant exercise</font></td>
    <td width="13" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="53" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">681,845</font></td>
    <td width="14" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="53" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="13" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="46" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="13" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8" width="448">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Senior notes applied to purchase of Series E stock</font></td>
    <td width="13" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="53" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">1,000,000</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="53" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="13" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="46" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="13" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" width="448">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Issuance of stock warrants in connection with convertible
    debt</font></td>
    <td width="13" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="53" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="14" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="53" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">624,750</font></td>
    <td width="13" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="46" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">384,000</font></td>
    <td width="13" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8" width="448">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Purchase of computer equipment with capital lease</font></td>
    <td width="13" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="53" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="53" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">50,041</font></td>
    <td width="13" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="46" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="13" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" width="448">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">12% subordinated notes and interest converted to common stock</font></td>
    <td width="13" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="53" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">2,435,032</font></td>
    <td width="14" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="53" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="13" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="46" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="13" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8" width="448">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Sale of equipment for accounts payable</font></td>
    <td width="13" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="53" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">117,000</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="53" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="13" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="46" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="13" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" width="448">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Common stock issued on conversion of Series B stock</font></td>
    <td width="13" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="53" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="14" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="53" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">2,101,413</font></td>
    <td width="13" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="46" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">274,186</font></td>
    <td width="13" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8" width="448">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Common stock issued on conversion of Series C stock</font></td>
    <td width="13" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="53" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">236,498</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="53" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="13" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="46" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="13" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" width="448">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Common stock issued on conversion of Series D stock</font></td>
    <td width="13" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="53" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">1,935,559</font></td>
    <td width="14" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="53" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="13" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="46" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="13" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8" width="448">
    <p style="margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;">
    <font size="2">Common stock issued on conversion of Series E stock</font></td>
    <td width="13" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="53" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">823,208</font></td>
    <td width="14" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="53" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="13" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="6" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="46" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="13" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
</table>


<p align="center"><font face="Times New Roman" size="2">F-25</font></p>
<hr size="3" color="#C0C0C0">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
<p>&nbsp;</p>

<p><a href="#TABLE OF CONTENTS"><font size="1">TABLE OF CONTENTS</font></a></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td width="60%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><b><font size="2">American
    Technology Corporation</font></b><br>
    <b><font size="2">Notes to the Financial Statements</font></b></td>
  </tr>
  <tr>
    <td valign="bottom">
    <div style="border:none;border-bottom:solid .05em;padding:0in 0in 1.0pt 0in">
      <div style="border:none;border-bottom:solid .25em;padding:0in 0in 1.0pt 0in">
      </div>
    </div>
    </td>
  </tr>
</table>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font size="2">16. SUMMARIZED
QUARTERLY RESULTS (unaudited)</font></b></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">The following
table presents unaudited operating results for each quarter within the two most
recent years. The Company believes that all necessary adjustments consisting
only of normal recurring adjustments, have been included in the amounts stated
below to present fairly the following quarterly results when read in conjunction
with the financial statements included elsewhere in this report. Results of
operations for any particular quarter are not necessarily indicative of results
of operations for a full fiscal year.</font></p>
<p style=" margin-bottom:0pt; margin-top:0pt;"><font size="2">&nbsp;</font></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><b><font size="1">Fiscal 2003</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="12%" colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">First</font></b><br>
    <b><font size="1">Quarter</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="12%" colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Second</font></b><br>
    <b><font size="1">Quarter</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="12%" colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Third</font></b><br>
    <b><font size="1">Quarter</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="12%" colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Fourth</font></b><br>
    <b><font size="1">Quarter</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">Revenues</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="11%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">423,299 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="11%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">237,942 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="11%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">313,612 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="11%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">340,573 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">Gross Profit (Loss) (1)</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">101,664 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(112,842</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">127,511 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">(344,984</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">Net loss</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">($1,731,645</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">($1,854,306</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">($2,382,652</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">($2,258,410</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">Loss per Share (2)</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">($0.13</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">($0.18</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">($0.19</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">($0.12</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
  </tr>
</table>
<p><br>
</p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><b><font size="1">Fiscal 2002</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="11%" colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">First</font></b><br>
    <b><font size="1">Quarter</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="12%" colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Second</font></b><br>
    <b><font size="1">Quarter</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="12%" colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Third</font></b><br>
    <b><font size="1">Quarter</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="12%" colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Fourth</font></b><br>
    <b><font size="1">Quarter</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">Revenues</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="10%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">256,621 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="11%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">199,433 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="11%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">235,691 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="11%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">319,007 </font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">Gross Profit (Loss) (1)</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">140,162 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">77,048 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">76,693 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">33,005 </font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">Net loss</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">($1,709,141</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">($1,975,483</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">($2,152,066</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">($2,383,442</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="2">)</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">Loss per Share (2)</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="10%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">($0.12</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">($0.14</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">($0.16</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="11%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">($0.18</font></td>
    <td width="2%" valign="bottom"><font size="2">)</font></td>
  </tr>
</table>
<p><br>
<br>
</p>
<table width="100%" cellspacing="0" cellpadding="0">
  <tr>
    <td width="0%"></td>
    <td width="4%" nowrap valign="top">
    <p style=" margin-bottom:0pt; margin-top:3pt;"><font size="1">(1)</font></td>
    <td valign="top">
    <p style=" margin-bottom:0pt; margin-top:3pt;"><font size="2">Gross profit
    is calculated by subtracting cost of revenues from total revenues. </font>
    </td>
  </tr>
</table>
<p><br>
</p>
<table width="100%" cellspacing="0" cellpadding="0">
  <tr>
    <td width="0%"></td>
    <td width="4%" nowrap valign="top">
    <p style=" margin-bottom:0pt; margin-top:3pt;"><font size="1">(2)</font></td>
    <td valign="top">
    <p style=" margin-bottom:0pt; margin-top:3pt;"><font size="2">Earnings per
    share are computed independently for each quarter and the full year based
    upon respective average shares outstanding. Therefore, the sum of the
    quarterly net earnings per share amounts may not equal the annual amounts
    reported.</font></td>
  </tr>
</table>
<p><br>
</p>

<p align="center"><font size="2" face="Times New Roman">F-26</font></p>
<hr size="3" color="#C0C0C0">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
<p>&nbsp;</p>


<p><a href="#TABLE OF CONTENTS"><font size="1">TABLE OF CONTENTS</font></a></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td width="60%" valign="bottom">
    <p style="margin-bottom:0pt;margin-top:0in;"><b><font size="2">American
    Technology Corporation</font></b><br>
    <b><font size="2">Schedule II - Valuation and Qualifying Accounts</font></b></td>
  </tr>
  <tr>
    <td valign="bottom">
    <div style="border:none;border-bottom:solid .05em;padding:0in 0in 1.0pt 0in">
      <div style="border:none;border-bottom:solid .25em;padding:0in 0in 1.0pt 0in">
      </div>
    </div>
    </td>
  </tr>
</table>
<p style=" margin-bottom:0pt; margin-top:12pt;"><b><font SIZE="2">ALLOWANCE FOR
DOUBTFUL ACCOUNTS</font></b></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><b><font size="1">Description</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Balance at</font></b><br>
    <b><font size="1">Beginning</font></b><br>
    <b><font size="1">Of period </font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Charged to</font></b><br>
    <b><font size="1">Cost and</font></b><br>
    <b><font size="1">Expenses </font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Deductions </font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Balance</font></b><br>
    <b><font size="1">At end of</font></b><br>
    <b><font size="1">Period </font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">Year ended September 30, 2003</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">20,191</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">4,809</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">25,000</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">Year ended September 30, 2002</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">20,191</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">20,191</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">Year ended September 30, 2001</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">20,000</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">4,139</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">3,948</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">20,191</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p><br>
</p>
<p style=" margin-bottom:0pt; margin-top:0pt;"><b><font SIZE="2">RESERVE FOR
OBSOLESCENCE</font></b></p>
<p style=" margin-bottom:0pt; margin-top:0pt;"><font size="2">&nbsp;</font></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><b><font size="1">Description</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Balance at</font></b><br>
    <b><font size="1">Beginning</font></b><br>
    <b><font size="1">Of period</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Charged to</font></b><br>
    <b><font size="1">Cost</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Deductions</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Balance</font></b><br>
    <b><font size="1">At end of</font></b><br>
    <b><font size="1">Period</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">Year ended September 30, 2003</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">20,000</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">20,000</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">Year ended September 30, 2002</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">20,000</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">20,000</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">Year ended September 30, 2001</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">20,000</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">20,000</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p><br>
</p>
<p style=" margin-bottom:0pt; margin-top:0pt;"><b><font SIZE="2">WARRANTY
RESERVE</font></b></p>
<p style=" margin-bottom:0pt; margin-top:0pt;"><font size="2">&nbsp;</font></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse; ">
  <tr>
    <td valign="bottom">
    <p style="margin-top:2pt;margin-bottom:0pt;"><b><font size="1">Description</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Balance at</font></b><br>
    <b><font size="1">Beginning</font></b><br>
    <b><font size="1">Of period</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Charged to</font></b><br>
    <b><font size="1">Cost and</font></b><br>
    <b><font size="1">Expenses</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Deductions</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom">
    <p style="text-align:center;margin-top:2pt;margin-bottom:0pt;"><b>
    <font size="1">Balance</font></b><br>
    <b><font size="1">At end of</font></b><br>
    <b><font size="1">Period</font></b></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="2" valign="top">
    <hr noshade width="100%" color="gray" size="1">
    </td>
    <td width="2%" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">Year ended September 30, 2003</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">6,313</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">313,187</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">319,500</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">Year ended September 30, 2002</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">6,313</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">6,313</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="6%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="7%" valign="bottom">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="1">&nbsp;</font></td>
    <td width="2%" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="bottom" style="background: #EAF9E8">
    <p style="margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">Year ended September 30, 2001</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="6%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">6,313</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="8%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">&#151;</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
    <td width="1%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">$</font></td>
    <td width="7%" valign="bottom" style="background: #EAF9E8">
    <p style="text-align:right;margin-top:2pt;margin-bottom:0pt;">
    <font size="2">6,313</font></td>
    <td width="2%" valign="bottom" style="background: #EAF9E8"><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p><br>
<br>
</p>

<p align="center"><font face="Times New Roman" size="2">F-27</font></p>
<hr size="3" color="#C0C0C0">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
<p>&nbsp;</p>



</BODY>
</HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.27
<SEQUENCE>3
<FILENAME>atco_gda-exhibit.txt
<TEXT>
<PAGE>

     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission

                                                                  Exhibit 10.27

                        LICENSE AND REMARKETER AGREEMENT


         THIS AGREEMENT (the "Agreement") is entered into as of February 14,
2003 (the "Effective Date"), by and between American Technology Corporation,
located at 13114 Evening Creek Drive South, San Diego, California 92128 ("ATC"),
and General Dynamics Armament and Technical Products, Inc., located at 128
Lakeside Avenue, Burlington, Vermont 05401 ("GDATP").

         WHEREAS, ATC has developed or acquired and owns or has the right to
license, certain patent rights, technical information and know-how, including
trade secrets and copyrights therein, relating to the design, manufacture,
testing, operation and maintenance of certain transducers and high intensity
directed acoustics; and

         WHEREAS, GD-ATP desires to obtain an exclusive, worldwide license to
make, have made, use and sell Products (defined below) and sell ATC Products
(defined below) for and to Customers (defined below) for Applications (defined
below), which use or incorporate the Technologies (defined below);

         NOW, THEREFORE, for and in consideration of the covenants and
undertakings herein provided, and other good and valuable consideration, the
receipt and sufficiency of which is reciprocally acknowledged, IT IS AGREED AS
FOLLOWS:

1.       DEFINITIONS.

         "Affiliate" means, with respect to any person or entity, any present or
future entity directly or indirectly controlling, controlled by, or under common
control with such person or entity. With respect to GD-ATP, the term
"Affiliates" includes, but is not limited to, General Dynamics Corporation and
any direct or indirect subsidiary of General Dynamics Corporation.

         "Agreement Year" means, for the first Agreement Year, the period
commencing on the Effective Date and ending December 31, 2003, and thereafter,
each successive calendar year during the Term.

         "Applications" means the applications listed in Attachment A.

         "ATC Products" means the Products listed in Attachment B.

         "Claims" has the meaning specified in Section 9(a).

         "Customers" means the customers listed in Attachment A.

         "Components" means the components based on the Technologies and listed
on Attachment B.

         "Confidential Information" has the meaning specified in Section 10.


<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission

         "Improvements" means any and all improvements including but not limited
to findings, discoveries, inventions, additions, modifications, or changes to or
relating to the Technologies, Components or Products or to processes for
manufacturing, testing, operating or maintaining Products or Components.

         "Losses" has the meaning specified in Section 9(a).

         "Products" means any and all products using or incorporating any
Component or Technology, including without limitation ATC Products.

         "Technology" or "Technologies" means all inventions (whether or not
patentable), issued patents, pending applications for patents, and patents which
may be issued from current applications (including divisionals, reissues,
renewals, re-examinations, continuations, continuations in part and extensions),
technical knowledge and information, whether public or proprietary, including,
but not limited to, all drawings, bills of materials, specifications, manuals,
trade secrets, and proprietary or confidential technical information,
copyrightable works (whether or not copyrighted), software and computer
programs, electronic data files, manufacturing and production processes,
maintenance information, and any other such technical information owned by ATC
or which ATC has the right to license during the term of this Agreement and
relating to the technologies set forth on Attachment A. Technologies shall also
include any Improvements or copyrighted materials related to the foregoing
developed by or for ATC prior to or during the term of this Agreement or by
GD-ATP during the term of this Agreement.

         "Term" means the term of this Agreement as specified in Section 4(a) as
may be extended pursuant to that section.

         "Trademarks" has the meaning specified in Section 2(f).

2.       LICENSE AND REMARKETING RIGHTS.

         (a) LICENSE GRANT. ATC hereby grants GD-ATP, and GD-ATP accepts, a
worldwide, exclusive, even as to ATC and except as to any Affiliate of GD-ATP,
license (with a limited right to sublicense as set forth herein) to use the
Technologies to make, have made, use, import, export, sell, offer to sell,
and/or service Products, including but not limited to ATC Products, for
exclusive use in the Applications and for exclusive sale to the Customers listed
on Attachment A; provided, however, that all Products sold by GD-ATP pursuant to
this Agreement shall include one (1) or more Components; provided further, that
all Components shall be acquired by GD-ATP exclusively from ATC. GD-ATP shall
have the right to grant sublicenses hereunder, without ATC's consent (i) to any
of its Affiliates to the full extent of GD-ATP's rights under this Agreement,
and (ii) to any third party for the purposes of having made, making, importing,
exporting, repairing and servicing Products. Nothing herein shall limit ATC's
ability to sell items directly to the United States government to the extent not
otherwise in violation of this Agreement or 48 C.F.R. 52.203-6.


                                      -2-
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission


         (b) COMPONENT PURCHASES. GD-ATP agrees that all Components incorporated
into Products shall be acquired exclusively from ATC. With respect to Components
purchased other than for GD-ATP's or a sublicensee's use for research, display
or demonstration purposes, ATC shall charge GD-ATP or the sublicensee [***], as
may be amended from time to time, and [***]. [***]. ATC may add Components to
Attachment B, and, upon twenty (20) days prior written notice, change the list
prices for Components specified on Attachment B. GD-ATP recognizes that ATC may
manufacture components having different features than the Components, and which
incorporate the Technologies, for applications other than the Applications and
for customers other than Customers. [***].

         (c) ATC PRODUCT PURCHASES. GD-ATP and its sublicensees may purchase ATC
Products for resale with or without modification by GD-ATP or its sublicensees.
With respect to ATC Products purchased other than for GD-ATP's or a
sublicensee's use for research, display or demonstration purposes, ATC shall
charge GD-ATP and its sublicensees [***], as may be amended from time to time,
and [***]. ATC may add ATC Products to Attachment B and upon twenty (20) days
prior written notice change the list prices for ATC Products specified on
Attachment B. GD-ATP recognizes that ATC may manufacture products having
different features than the ATC Products, and which incorporate the
Technologies, for applications other than the Applications and for customers
other than Customers. [***].

         (d) ADDITIONAL CUSTOMERS. During the Term of this Agreement, GD-ATP may
request ATC to add customers to the list of Customers in Attachment A by
submitting a request in writing to ATC. Such request shall inform ATC of the
nature of GD-ATP's relationship with the proposed customer, and the basis for
GD-ATP's request. ATC shall respond to such request within twenty (20) days
subsequent to its receipt, and the decision to grant such request shall be
within the sole discretion of ATC. Nothing in this Agreement shall restrict ATC
from licensing the Technologies or selling Components or Products (i) to persons
other than Customers or (ii) for applications not designated in Attachment A, on
an exclusive or non-exclusive basis.

         (e) IMPROVEMENTS TO THE TECHNOLOGIES. Improvements to the Technologies
developed solely by or on behalf of [***] shall be [***] (the "Developing
Party"), subject to the license grants made in Section 2(a) and in this Section
2(e). [***] a worldwide, non-exclusive, perpetual, fully paid-up, royalty-free
license (with the right to sublicense) to make, have made, use, sell, offer to
sell and/or service products using and/or incorporating any Improvement to the
Technologies developed by or on behalf of [***]. Each party shall promptly
disclose to the other party each of its Improvements. With respect to any
Improvement to the Technologies that is jointly developed by the parties or is
developed on behalf of both parties (with or without collaboration by either
party or both parties) ("Joint Improvements"), the parties agree that [***] in
and to any such Joint Improvement, as well as in and to any patent applications
and patents thereon in all countries, subject to the provisions hereof. [***].

         (f) TRADEMARK LICENSE. During the term of this Agreement, and
thereafter to the extent necessary to allow GD-ATP and/or its sublicensees to
exercise their rights and fulfill their obligations under Section 4(b), ATC
hereby grants GD-ATP a worldwide, non-exclusive, fully paid-up, royalty-free
license to use ATC's trademarks, trade names, logos, other distinguishing marks
of ATC (collectively, "Trademarks") and ATC marketing materials on or in
connection with Products which GD-ATP or its sublicensees market or sell as
permitted by this Agreement; provided, however, that GD-ATP shall at least
maintain ATC's quality standards in connection with Products and shall not
intentionally do or cause anything to be done to adversely affect ATC's rights
in and to the Trademarks. GD-ATP shall not distribute any marketing materials
that have not been first approved by ATC, which approval shall not be
unreasonably withheld.


                                      -3-
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission


         (g) DEMONSTRATION PRODUCTS AND MARKETING MATERIALS. ATC shall provide
GD-ATP with demonstration Products as appropriate (but at least one (1)
demonstration unit of each existing and new Product), free of charge, as
mutually agreed, and with copies of its sales and marketing literature regarding
ATC and the Products as reasonably required by GD-ATP, and with sufficient
training in the use of the Products to permit GD-ATP to make effective sales
presentations, all at no charge to GD-ATP. GD-ATP and its sublicensees may
purchase additional Products and Components for their internal research, display
and demonstration purposes [***] in Attachment B. If GD-ATP and ATC reasonably
believe that specialized marketing materials or demonstration Products are
necessary in connection with a particular potential Customer in an Application,
ATC shall provide such materials and support to GD-ATP which shall reimburse ATC
for such materials and support [***]. Any request for payment by ATC pursuant to
this section shall be in writing and accompanied by a detailed description of
ATC's cost.

         (h) MARKETING ASSISTANCE. GD-ATP shall provide reasonable display space
for Products at certain trade shows as mutually agreed to by the parties. In
addition, GD-ATP shall use reasonable efforts to assist ATC with efforts to
obtain government/customer funding to further develop existing or new Products
employing the Technologies. GD-ATP will not exert improper influence to solicit
or obtain government contracts, and has not represented to ATC that it is able
to obtain any government contract through improper influence. The parties agree
and acknowledge that use of government funds for development as contemplated
hereunder may preclude either party from exercising exclusive rights in certain
information related to new Products employing the Technologies, and that
obtaining government funding may cause certain trade secret and patent rights to
be granted to the government, which in turn may permit the government to
disclose such information to third parties.

         (i) EXCLUSIVITY. GD-ATP will provide ATC with annual good faith
forecasts of the dollar amount of purchases for each Component and ATC Product
that GD-ATP expects GDATP and its sublicensees to purchase from ATC. Each
forecast shall separately forecast sales with respect to each of the
Technologies identified in Attachment C. The forecast for the first Agreement
Year is set forth on Attachment C. On or before each annual anniversary of the
Effective Date during the Term, GD-ATP shall provide a good faith forecast of
its dollar purchase forecast per Technology for the next Agreement Year. Such
purchase forecasts will not be binding on GD-ATP, except to the extent provided
by this section with respect to exclusivity. GD-ATP and ATC will attempt to
agree in good faith prior to each Agreement Year on an aggregate dollar purchase
forecast for the next Agreement Year, taking into account prior year sales and
prior year growth in sales, new ATC Products and Components and anticipated new
sales to Customers. The license granted in Section 2(a) hereof shall become
non-exclusive for a particular Technology (and only for that Technology) if all
of the following conditions occur with respect to that Technology in a
particular Agreement Year: (i) the total dollar amount of purchase orders
actually received from GD-ATP and all of its sublicensees for Components and ATC
Products relating to that Technology, plus any funding obtained from any source
or provided for research and development relating to that Technology, is less
than [***] (the "Exclusivity Threshold") and [***]; (ii) [***] is not
attributable to any material action, inaction or fault of ATC, or material
government restrictions on GD-ATP's or its sublicencees' ability to sell the
Products for use in Applications or to sell to material Customers; and (iii) no
Force Majeure Event (as defined below) has prevented the achievement by GD-ATP
and its sublicensees of the Exclusivity Threshold; provided, however, that the
license granted in Section 2(a) shall remain exclusive for all Technologies
[***]. Purchases and/or funding obtained [***].

                                      -4-
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission


         (j) MARKETING EFFORTS. GD-ATP shall (i) create product and marketing
strategies for the Applications, (ii) market the Products and/or ATC Products to
Customers for the Applications, (iii) provide service consistent with the nature
of the business to the Customers, and (iv) assist ATC in identifying new
products based on the Technologies that may be appropriate for development at
ATC's discretion for the Customer Applications.

         3. INTERNAL USE PURCHASES. GD-ATP and its sublicensees may purchase
Products and Components for their respective internal research, display and
demonstration purposes, and not for resale at the [***] described in Attachment
B. [***].

4.       TERM AND TERMINATION.

         (a) TERM. The initial term of this Agreement is for a period of five
(5) years from the Effective Date. GD-ATP shall have the option of extending the
term for an additional five (5) years by providing ATC with at least thirty (30)
days' prior written notice of its intention to extend the term before the term
would otherwise expire. Notwithstanding the foregoing, GD-ATP may terminate this
Agreement at any time without cause by providing ATC with at least sixty (60)
days' prior written notice of such termination.

         (b) RIGHTS ON TERMINATION. In the event that this Agreement is
terminated for any reason other than a breach by GD-ATP, GD-ATP and its
sublicensees shall continue to have the right to (i) resell ATC Products and
Components, (ii) manufacture and have manufactured Products pursuant to existing
Customer contracts, (iii) sell Products to exhaust its inventory of Components,
ATC Products and Products in existence at the date of termination and to fulfill
obligations under any existing Customer contracts, and (iv) provide maintenance
and related services to Customers using the Technology, Components, ATC Products
and Products; and GD-ATP shall continue to have the right to grant sublicenses
hereunder for the purpose of exercising its rights under this Section 4(b).

         (c) EFFECT OF DEFAULT. In the event that either party defaults in the
performance of any of its material duties or obligations set forth in this
Agreement, and such default is not substantially cured within thirty (30) days
after written notice is given to the defaulting party specifying the default,
then the non-defaulting party may, by giving written notice thereof to the
defaulting party, terminate this Agreement as of the date specified in such
notice of termination.

         (d) EFFECT OF BANKRUPTCY. Any licenses granted hereunder shall not be
affected by a voluntary filing for bankruptcy or insolvency regarding either
party, or an involuntary filing not dismissed within ninety (90) days, or any
adjudication that either party is bankrupt or insolvent, or by the filing of any
petition or answer seeking reorganization, readjustment, or arrangement of the
business of either party under any federal or state law relating to bankruptcy
or insolvency, or by the appointment of a receiver for all or substantially all
of the property of either party, or by the making by either party of any
assignment or attempted assignment for the benefit of creditors, or by the
institution of any proceedings for the liquidation or winding up of either
party's business. ATC acknowledges that in the event a petition for bankruptcy
of ATC is filed under federal bankruptcy law and this Agreement is rejected in
the bankruptcy proceedings, GD-ATP may elect to retain its license rights as
this Agreement is an executory contract protected under Section 11 U.S.C.
Section 365(n).


                                      -5-
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission


         (e) EFFECT OF TERMINATION. Upon the expiration or any termination of
this Agreement, the license granted hereunder to GD-ATP shall terminate, except
as provided in Sections 2(e) and 4(b). GD-ATP shall, except as provided
hereunder, thereupon cease and desist from making, having made, using, selling,
and distributing the Products, or using the Trademarks, and will likewise cease
and desist from any and all use of the Technology, including the proprietary
rights therein, subject to the rights granted to GD-ATP in Sections 2(e) and
4(b), and GD-ATP shall have no further obligation hereunder. All proprietary
information, including Confidential Information, in whatever form, in the
custody or control of either party or any third-party contractor, bearing on the
subject matter of this Agreement or transferred incident to activities
hereunder, shall be returned to the disclosing party, or secured, or destroyed,
as is reasonable in each case in light of all circumstances, so as to enable the
maintenance of confidentiality with respect thereto, and preserve the value of
the Confidential Information to the parties.

5.       PERMITTED ACTIVITIES.

         (a) GD-ATP'S ACTIVITIES. Nothing in this Agreement shall be construed
to prevent GD-ATP from: (i) engaging in any activities with respect to products
or services competitive with those supplied by ATC or entering into agreements
with third parties having a similar purpose or similar terms to this Agreement;
or (ii) independently developing and/or selling any materials, products or
services which are similar to those of ATC as long as they do not infringe on
any existing ATC patents or patents that issue from pending ATC applications and
they were not developed using any ATC Confidential Information; or (iii) using
data, processing, techniques, ideas, and other know-how gained during the
performance of this Agreement in the furtherance of its business, to the extent
such use does not conflict with the confidentiality provisions of this
Agreement.

         (b) ATC'S PRICING. GD-ATP recognizes that the Components, ATC Products
and Products targeted for the Applications herein are expected to be different
in quality and features than products that ATC has developed or may develop from
the Technologies for other markets and applications for consumers or industrial
customers or others. Except for the exclusivity relating to Applications,
Customers, Products, and ATC Products set forth herein, [***].

6.       REPRESENTATIONS AND WARRANTIES.

         (a) MUTUAL WARRANTIES. Each party to this Agreement represents and
warrants to the other party that: (i) such party has the full corporate right,
power and authority to enter into this Agreement and to perform all acts
required of it hereunder; (ii) the execution of this Agreement by such party,
and the performance by such party of its obligations and duties hereunder, do
not and will not violate any agreement to which such party is a party, or by

                                      -6-
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission


which it is otherwise bound; (iii) when executed and delivered by such party,
this Agreement will constitute the legal, valid and binding obligation of such
party, enforceable against such party in accordance with the terms and
conditions of this Agreement; (iv) it is not subject to any pending or
threatened litigation or governmental action that could materially interfere
with its performance of this Agreement; and (v) such party is in compliance with
and will comply with all applicable U.S. material laws, rules and regulations
with respect to its obligations under this Agreement. Neither party has been
induced to enter into this Agreement by any representations or promises not
specifically stated herein.

         (b) INTELLECTUAL PROPERTY WARRANTY. ATC represents and warrants to
GD-ATP, its sublicensees and Customers that the exercise by GD-ATP, its
sublicensees and Customers of rights granted under this Agreement will not
infringe upon any patent, trademark, copyright, trade secret, or other
intellectual property or proprietary right of any third party.

         (c) PRODUCT WARRANTY. ATC represents and warrants to GD-ATP, its
sublicensees and Customers that the Components and ATC Products comply with the
highest industry standards and will be free from defects in materials and
workmanship for a period of one (1) year from the date of installation by GD-ATP
or a sublicensee, or [***] from the date of shipment by ATC, whichever is
earlier. If a defect exists, ATC will (i) repair the defective item at no
charge, using new replacement parts or, if not prohibited under a government
contract or by law, refurbished replacement parts, (ii) exchange the item with
an item that is new or which has been manufactured from new or, if not
prohibited under a government contract or by law, serviceable used parts and is
at least functionally equivalent to the original item, or (iii) reimburse the
total amount paid for the defective item. A replacement or repaired item shall
be warranted for the remainder of the warranty period or [***] from the date the
replacement or repaired item is shipped from ATC, whichever provides longer
coverage. GD-ATP, its sublicensee or a Customer (as applicable) shall deliver
the defective item, at its expense, to ATC at the address first written above.
The parties agree and acknowledge that GD-ATP, its sublicensee or a Customer (as
applicable) shall be responsible for all loss or damage during shipment of an
item by them pursuant to this paragraph. Repaired or replaced items will be
shipped to GD-ATP, its sublicensee or a Customer (as applicable) via the same
shipping method as they were received by ATC, at ATC's expense and risk of loss.

         (d) AUTHORIZED WARRANTIES. No agent, employee, or representative of
GD-ATP has any authority to bind ATC to any affirmation, representation, or
warranty concerning the Components or the Products, unless such affirmation,
representation, or warranty is specifically included in this Agreement or in
another document generated by ATC which expressly authorizes GD-ATP to make
specified warranties. Any unauthorized affirmation, representation, or warranty
shall not be enforceable by GD-ATP or any subsequent buyer of any Components or
Products. GD-ATP shall be liable for any representations or warranties made by
it, whether in writing or orally, other than those made by ATC herein, unless it
receives written approval from ATC.

7.       INTELLECTUAL PROPERTY ENFORCEMENT. Each of GD-ATP and ATC shall notify
the other party in writing of any suspected or known infringement or
misappropriation of the Technology by a third party, and shall inform the other
party of any evidence in their possession of such infringement or
misappropriation, and provide details to the extent known of such infringement.


                                      -7-
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission


         (a) ACTION BY ATC. ATC shall have the option but not the obligation to
take such measures as may be required to terminate any infringement or
misappropriation by a third party. Any such action shall be at the sole expense
of ATC. ATC shall be entitled to all damages and settlement proceeds from third
parties resulting from any such proceeding. GD-ATP shall provide any assistance
reasonably requested by ATC in the preparation and prosecution of that claim, at
the expense of ATC.

         (b) ACTION BY GD-ATP. Should ATC decide to not pursue a Claim, as
defined in Section 9(a), against a third party for misappropriation or
infringement under Section 7(a), GD-ATP shall be entitled to pursue such Claim.
Any such Claim shall be at the sole expense of GD-ATP. GD-ATP shall be entitled
to all damages and settlement proceeds from any third parties resulting from any
such Claim. ATC shall provide any assistance reasonably requested by GD-ATP in
the preparation and prosecution of that Claim, at the expense of GD-ATP.

         (c) JOINDER BY ATC. At its sole option, ATC may join as plaintiff in
any action brought to enforce a Claim by GD-ATP brought pursuant to Section 7(b)
with respect to the Technologies. In such event, the parties shall share equally
the expenses of any such action. Each party shall be entitled to one-half of all
damages and settlement proceeds recovered after first reimbursing each party for
any amounts expended by them in the prosecution of such Claim.

         (d) SETTLEMENT. The settlement of any Claim involving any consent or
agreement allowing any third party any rights with respect to the intellectual
property of ATC shall require the prior written consent of ATC.

8.       LIMITATION OF LIABILITY.

         (a) MUTUAL LIMITATION OF LIABILITY. NOTWITHSTANDING ANYTHING THAT MAY
BE TO THE CONTRARY IN THIS AGREEMENT, UNDER NO CIRCUMSTANCES WILL EITHER PARTY,
ITS AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES OR CUSTOMERS BE LIABLE TO THE
OTHER PARTY, ITS AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES OR CUSTOMERS FOR ANY
CONSEQUENTIAL, INDIRECT, SPECIAL, PUNITIVE OR INCIDENTAL DAMAGES OR LOST
PROFITS, WHETHER FORESEEABLE OR UNFORESEEABLE, ARISING OUT OF BREACH OF
CONTRACT, MISREPRESENTATION, NEGLIGENCE, STRICT LIABILITY IN TORT OR OTHERWISE,
EVEN IF THE PARTY HAS PREVIOUSLY BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. THIS EXCLUSION AND LIMITATION SHALL BE EFFECTIVE TO THE EXTENT
PERMITTED BY APPLICABLE LAW.

         (b) LIMITATION OF PRODUCT WARRANTY LIABILITY. THE PRODUCT WARRANTY AND
REMEDIES SET FORTH ABOVE ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES,
REMEDIES AND CONDITIONS, WHETHER ORAL OR WRITTEN, EXPRESS OR IMPLIED, REGARDING
PRODUCT MATERIALS AND WORKMANSHIP. ATC SPECIFICALLY DISCLAIMS ANY AND ALL
IMPLIED WARRANTIES, INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE. IF ATC CANNOT LAWFULLY DISCLAIM IMPLIED
WARRANTIES, ALL SUCH WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE, ARE LIMITED IN DURATION TO THE DURATION OF THE

                                      -8-
<PAGE>

PRODUCT WARRANTY. NO ATC LICENSEE, DISTRIBUTOR, RETAILER, INSTALLER, OR EMPLOYEE
IS AUTHORIZED TO MAKE ANY MODIFICATION, EXTENSION, OR ADDITION TO THE PRODUCT
WARRANTY. ATC SHALL NOT BE LIABLE FOR, NOR SHALL THE PRODUCT WARRANTY INCLUDE OR
APPLY TO, LOSS OR DAMAGE CAUSED BY OR RESULTING FROM ANY OF THE FOLLOWING: (i)
IMPROPER INSTALLATION OF THE PRODUCT OR THE FAILURE BY A PARTY OTHER THAN ATC TO
INSTALL THE PRODUCT IN STRICT COMPLIANCE WITH ATC'S SPECIFICATIONS; (ii)
IMPROPER OPERATION OR USE OF THE PRODUCT; (iii) USE OF THE PRODUCT BEYOND ITS
RATED CAPACITY OR SPECIFICATIONS; (iv) IMPROPER OR UNAUTHORIZED MODIFICATION,
ALTERATION OR REPAIR; (v) A FORCE MAJEURE EVENT (AS DEFINED BELOW); OR (vi) THE
ENFORCEMENT OF ANY LAW OR ORDINANCE REGULATING USE OF THE PRODUCT, EXCEPT FOR
ANY LAW OR ORDINANCE IN EFFECT AS OF THE EFFECTIVE DATE. For purposes of this
Section 8(b), GD-ATP shall be considered an authorized agent of ATC.

9.       INDEMNITY.

         (a) INTELLECTUAL PROPERTY INDEMNITY BY ATC. ATC shall defend, hold
harmless, and indemnify GD-ATP, its Affiliates, its sublicensees and their
respective employees, directors, officers, contractors, subcontractors,
customers, attorneys, partners and agents ("GD-ATP Indemnitees") from and
against any and all damages, judgments, liabilities, payments made in
settlement, costs, and expenses, including reasonable attorneys' fees
(collectively, "Losses") for claims, actions or proceedings ("Claims") arising
out of ATC's breach of any warranty set forth in this Agreement or alleging that
GD-ATP Indemnitees' use of a Product, ATC Product, Component or any of the
Technologies infringes or violates any patent, copyright, trade secret, license,
or other intellectual property right of any third party, provided that a GD-ATP
Indemnitee promptly notifies ATC of any such Claim. ATC shall have control over
the defense or settlement of such Claim, except that GD-ATP Indemnitees may
participate in the defense of any such suit or proceeding through counsel of
their choice and at their expense. The GD-ATP Indemnitees shall provide ATC such
reasonable assistance as ATC may require, at ATC's expense, in defending or
settling such Claim. In the event that a Product, ATC Product, Component or any
of the Technologies, or any portion thereof, is held to constitute an
infringement and its use is enjoined, ATC may, at its option and expense, (i)
modify the infringing Product, ATC Product, Component or Technology so that it
or they are non-infringing, (ii) procure for GD-ATP the right to continue to use
the infringing Product, ATC Product, Component or Technology, or (iii) replace
the Product, ATC Product, Component or Technology with functionally equivalent,
non-infringing replacement products or technologies. Notwithstanding the
foregoing, this indemnification shall not apply if the claimed infringement is
attributable solely to a GD-ATP Indemnitee's use of the Product, ATC Product,
Component or Technology in combination with other products such that the
Product, ATC Product, Component or Technology would not be infringing apart from
its use in the combination, or if such Claim arises from ATC's compliance with
GD-ATP's designs, specifications or instructions, or from GD-ATP's or a
sublicensee's modification of the Product, ATC Product, Component or Technology
and, in both instances, the Claim could not be brought but for compliance with
GD-ATP's designs, specifications or instructions or the modification by GD-ATP
or the sublicensee.


                                      -9-
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission


         (b) GENERAL INDEMNITY BY ATC. ATC shall defend, hold harmless, and
indemnify the GD-ATP Indemnitees from and against any and all Losses (including,
but not limited to, damages for injury to or death of employees or other
individuals or destruction of property) arising directly or indirectly from or
in connection with any breach of this Agreement, negligence, gross negligence or
willful misconduct by ATC or its agent, provided that a GD-ATP Indemnitee
promptly notifies ATC of any such Claim. ATC shall have control over the defense
or settlement of such Claim, except that GD-ATP Indemnitees may participate in
the defense of any such suit or proceeding through counsel of their choice and
at their expense. The GD-ATP Indemnitees shall provide ATC such reasonable
assistance as ATC may require, at ATC's expense, in defending or settling such
Claim.

         (c) GENERAL INDEMNITY BY GD-ATP. GD-ATP agrees to defend, hold harmless
and indemnify, at its sole expense, ATC and its Affiliates and their employees,
directors, officers, contractors, subcontractors, attorneys, partners, agents,
successors and assigns ("ATC Indemnitees") from and against any and all Losses
(including, but not limited to, damages for injury to or death of employees or
other individuals or destruction of property) arising directly or indirectly
from or in connection with (i) the incorporation of any Components into products
by GD-ATP or a sublicensee if such Claim could not have arisen but for such
incorporation, (ii) any breach of this Agreement by GD-ATP, and (iii)
negligence, gross negligence or willful misconduct by GD-ATP or its
sublicensees, provided that an ATC Indemnitee promptly notifies GD-ATP of any
such Claim. GD-ATP shall have control over the defense or settlement of such
Claim, except that ATC may participate in the defense of any such Claim through
counsel of its choice and at its own expense. The ATC Indemnitees shall provide
GD-ATP such assistance as GD-ATP may require, at GD-ATP's expense, in defending
or settling such Claim. The parties agree and acknowledge that GD-ATP shall
under no circumstances defend, hold harmless or indemnify any ATC Indemnitee
hereunder for a Claim arising out of or related to a breach of this Agreement,
negligence, gross negligence or willful misconduct on the part of ATC or its
agent, or arising out of any warranty or indemnity obligations of ATC.

10.      CONFIDENTIALITY. Each party agrees to protect the confidentiality of
any information concerning the other party, the other party's customers
(including without limitation Customer information provided to ATC by GD-ATP
under Section 2(d)), trade secrets, business methods, processes, or procedures,
or other information learned during the course of performance under this
Agreement and marked "Confidential," in accordance with the terms set forth in
the Non-Disclosure Agreement executed between the parties on January 28, 2003,
as the same may be amended from time to time.

11.      AUDIT RIGHTS. GD-ATP shall maintain records for two (2) years following
the date of the payments to which such records pertain, sufficient to allow
verification of compliance with the terms of this Agreement and the accuracy of
payments made by GD-ATP to ATC hereunder. An independent auditor mutually
agreeable to ATC and GD-ATP shall be permitted, [***], to audit such records
during normal business hours upon fourteen (14) days prior written notice. Such
audit shall be subject to the confidentiality terms of this Agreement. [***]
shall bear the cost and expense of such audit, [***]. GD-ATP shall promptly pay
ATC all underpayments; provided, however that GD-ATP shall have no obligations
to pay any such underpayments to ATC which GD-ATP in good faith believes are not
properly owed, provided that the issue of whether any such purported
underpayment is owed is the subject of a pending dispute resolution procedure as
provided by Section 13(k).


                                      -10-
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission


12.      NONSOLICIT. Neither party shall recruit or solicit employees or
independent contractors of the other party until [***] after the end of the Term
of this Agreement without the advance written consent of the other party.

13.      GENERAL.

         (a) SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.

         (b) FORCE MAJEURE. Neither Party shall be liable or deemed to be in
default for any delay, interruption, or failure in performance under this
Agreement resulting from the following events: acts of God, acts of civil or
military authority; acts of the public enemy; war; accidents, fires, explosions,
power surges, earthquakes, floods, or unusually severe weather; strikes or labor
disputes; delays in transportation or delivery outside the reasonable control of
the affected party; epidemics; and any similar event beyond the affected party's
reasonable control ("Force Majeure Event"). The party whose performance is
affected by a Force Majeure Event will use reasonable efforts to avoid, remove
or minimize the impact of such event on the performance of its obligations at
the required level at the earliest possible date. If either party is, or
anticipates it is likely to be, delayed or prevented from performing its
obligations in connection with a Force Majeure Event, such party will notify the
other party within ten (10) business days after such party first becomes aware
of such Force Majeure Event.

         (c) NO AGENCY. The relationship between ATC and GD-ATP is only that of
independent contractors. Nothing in this Agreement shall be construed or
interpreted as creating an agency, joint venture, or partnership relationship
between the parties. Neither party shall have, nor shall it hold itself out as
having any right, power, or authority to create any contract or obligation,
either express or implied, on behalf of, in the name of, or binding upon the
other party or to pledge the other party's credit, or to extend credit in the
other party's name unless that party consents thereto in advance in writing.
GD-ATP may appoint or otherwise designate suitable sales representatives,
employees, and agents ("Representatives") to perform GD-ATP's obligations.
GD-ATP shall be solely responsible for its Representatives and their acts.

         (d) PUBLIC RELEASES. Except as provided in Section 2(f) of this
Agreement or as required by law or regulation, neither party may use the
trademarks or trade names of the other party or issue a news release, public
announcement, advertisement, or other form of publicity concerning the existence
of this Agreement or the services to be provided under this Agreement without
obtaining prior written approval from the other party.


                                      -11-
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission

         (e) ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Except as expressly permitted by this Agreement, neither party shall
assign, sublicense, delegate, or transfer any of its rights or obligations
hereunder without the prior written consent of the other party; provided,
however, that both parties shall be allowed to assign this Agreement without the
other's consent to an Affiliate or as part of any reorganization or purchase of
substantially all of the assets of or ownership interest in, the assigning
party. This Agreement shall be binding upon, and inure to the benefit of, each
party and its respective successors and permitted assigns.

         (f) WAIVER. The failure of either party to insist upon the performance
of any provision herein or to exercise any right or privilege granted to it
hereunder, shall not be construed as a waiver of such provision or any
provisions herein, and the same shall continue in full force. The various rights
and remedies given to or reserved by either party herein or allowed by law,
shall be cumulative, and no delay or omission to exercise any of its rights
shall be construed as a waiver of any default or acquiescence, nor shall any
waiver of any breach of any provision be considered the condoning of any
continuing or subsequent breach of the same provision.

         (g) AMENDMENTS, MODIFICATIONS AND SUPPLEMENTS. Any amendment,
modification, supplement or change hereto must be in writing and signed by the
parties hereto. No other act, document, usage or custom shall be deemed to amend
or modify this Agreement.

         (h) GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of New York without giving effect to
conflict-of-laws principles thereof. Each party consents to the personal
jurisdiction in the state and federal courts in the State of New York and agrees
not to commence any actions arising out of or relating to this Agreement in any
other state.

         (i) NOTICES. All notices required to be sent hereunder shall be in
writing and shall be deemed to have been given on: (i) the date sent by
confirmed facsimile, (ii) the date it was delivered by courier, or (iii) if by
certified mail return receipt requested, the date received, to the addresses and
to the attention of the persons set forth below, or to such other address or
individual as the parties may specify from time to time by written notice to the
other party:

         If to ATC:                    American Technology Corporation
                                       Attention:  Terry Conrad
                                       13114 Evening Creek Drive South
                                       San Diego, California 92128
                                       Phone: (858) 679-2114 Fax: (858) 679-0545

         With a copy to:               _________________________________________
                                       _________________________________________
                                       _________________________________________
                                       _________________________________________



                                      -12-
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission


         If to GD-ATP:                 Director, Contracts
                                       General Dynamics Armament
                                            and Technical Products, Inc.
                                       128 Lakeside Avenue
                                       Burlington, VT 05401
                                       Phone: (802) 657-6719 Fax: (802) 657-7203

         With a copy to:               General Counsel
                                       General Dynamics Armament
                                            and Technical Products, Inc.
                                       128 Lakeside Avenue
                                       Burlington, VT 05401
                                       Phone: (802) 657-6592 Fax: (802) 657-6590

         (j) COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same document. The exchange of a fully
executed Agreement (in counterparts or otherwise) by facsimile shall be
sufficient to bind the parties to the terms and conditions of this Agreement.

         (k) ARBITRATION. Except with respect to claims regarding a breach of
obligations related to Confidential Information or infringement of intellectual
property rights, including without limitation the right of a party to apply to a
court of competent jurisdiction for a temporary restraining order, preliminary
injunction or other equitable relief to preserve the status quo or to prevent
irreparable harm, all claims, disputes, controversies, or other matters in
question arising out of or relating to this Agreement that cannot be resolved by
the parties through face-to-face negotiations, first between the respective
manager for each party involved in the day-to-day performance of this Agreement,
and then, if still not resolved, between senior executives of each party, will
be settled by binding arbitration in accordance with the Commercial Rules
("Rules") of the American Arbitration Association then in effect. All
arbitration proceedings will be held in New York, New York, and will be
conducted by a single arbitrator mutually agreed upon by the parties; provided,
however, that in the event the parties cannot agree on an arbitrator, each party
shall choose one arbitrator and the two arbitrators shall choose a third
arbitrator and the arbitration proceedings shall be conducted by the foregoing
panel of three arbitrators. If the two initial arbitrators cannot agree upon a
third arbitrator within ten days after the appointment of the second arbitrator,
the third arbitrator shall be selected in accordance with the Rules. The parties
may take discovery by any means allowed by the Federal Rules of Civil Procedure
then in effect. The arbitrator may exclude from evidence any evidence not
previously shared with the other side. The cost of any arbitration or litigation
will be borne equally by the parties pending the arbitrator's awards. The
prevailing party in any arbitration proceeding or litigation hereunder will be
entitled, in addition to any other relief granted to it, to recover reasonable
attorneys' fees and the costs incurred in connection with the arbitration or
litigation. The arbitrator shall be bound by the express provisions set forth in
this Agreement and by the substantive law of the courts of New York that relate
to any controversy arising from this Agreement, and shall not modify any terms
of this Agreement or make any award of damages in excess of the amounts set
forth in this Agreement or grant any relief not expressly set forth in this
Agreement. The determinations of the arbitrator shall be final and, except as
provided by law, shall not be subject to judicial review. Any court of competent
jurisdiction may enforce any award or determination rendered by the arbitrator.


                                      -13-
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission


         (l) HEADINGS. The headings and sub-headings included in this Agreement
are for convenience only and do not in any way alter or affect the terms of this
Agreement.

         (m) ENTIRE AGREEMENT. This Agreement, together with any exhibits and
any attachments hereto, sets forth the entire agreement of the parties with
respect to the subject matter hereof, and supersedes any prior agreement or
understandings. If any provision hereof is held to be invalid, void, or
unenforceable, the remainder of the provisions shall nevertheless remain
unimpaired and in effect.

         (n) SURVIVAL. The following Sections of this Agreement shall survive
the expiration or any termination of this Agreement: 2(e), 4(a), 4(b), 4(e),
6(a), 6(b), 6(c), 6(d), 8(a), 8(b), 9(a), 9(b), 9(c), 10, [19(c)], 11 and 12.


                                      -14-
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission



         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective duly authorized representative
effective on the date and year first written above.

AMERICAN TECHNOLOGY CORPORATION
By:       /s/ Terry Conrad
        ---------------------------------------------
Name:   Terry Conrad
Title:  President

GENERAL DYNAMICS ARMAMENT AND TECHNICAL PRODUCTS, INC.
By:       /s/ Linda P. Hudson
        ---------------------------------------------
Name:   Linda P. Hudson
Title:  President




<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission


                                  ATTACHMENT A
               LISTING OF TECHNOLOGIES, CUSTOMERS AND APPLICATIONS
                                  (PAGE 1 OF 2)


TECHNOLOGIES
- ------------

     o    High intensity directional acoustics (HIDA Technology) as
          characterized by the results of GSA task order number [***], primary
          GSA contract [***], Phase One final report


CUSTOMERS
- ---------

DoD including:
     o    US Army
     o    US Navy
     o    US Marine Corps
     o    US Air Force
     o    SOCOM
     o    DARPA
     o    DTRA
     o    National Laboratories (Sandia, Livermore, etc.)

Dept. of Homeland Security including:
     o    US Coast Guard
     o    Immigration and Naturalization Service / Border Patrol
     o    Customs Service
     o    Federal Protective Services
     o    Transportation Security Agency
     o    Other Federal, State and Local Agencies / organizations / entities
     o    National Guard
     o    Embassies o Federal and State Prisons
     o    DOE/U.S. Power Plants
     o    DEA
     o    CIA
     o    Federal, state and local law enforcement agencies




                                      A-1
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission


                                  ATTACHMENT A
         LISTING OF TECHNOLOGIES, CUSTOMERS AND APPLICATIONS (CONTINUED)
                                  (PAGE 2 OF 2)


APPLICATIONS -- SCALEABLE EFFECTS WEAPONS
- -----------------------------------------

     o    Area Denial and Force Protection of vessels, ground vehicles, air
          vehicles, facilities, units or forces, including
          warning/communications applications
     o    Tactical weapon / self protection applications for man-mobile, manned
          and unmanned vehicle, or fixed installations
     o    Crowd control applications: warn, disorient, deny, deceive, psyops,
          clear, direct, and disperse
     o    Personnel stand-off
     o    Security stations including ports, geographical borders, perimeter
          fencing, access gates, and building entrances
     o    Resolution of "human shield" situations



                                      A-2
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission



                                  ATTACHMENT B
               ATC PRODUCTS LIST PRICES (AS OF SEPTEMBER 1, 2002)*


HIDA RUGGED SCALEABLE EFFECT WEAPON WITH INTERNAL AMPLIFIER AND WIRELESS
- ------------------------------------------------------------------------
INTERFACE
- ---------

         [***]

FUTURE PRODUCTS
- ---------------

         [***]

*GD-ATP, its Affiliates and sublicensees can purchase these Products for their
internal use [***]


COMPONENTS LIST PRICES (AS OF SEPTEMBER 1, 2002)**
- --------------------------------------------------

HIDA COMPONENTS
- ---------------

         [***]

** GD-ATP, its Affiliates and sublicensees can purchase Products and Components
for their internal use [***]. This shall also apply to future products using
Components that GD-ATP, its Affiliates and sublicensees purchase for internal
use.






ATC may add ATC Products and/or Components to this Attachment B from time to
time.



                                      B-1
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission



                                  ATTACHMENT C
                           FORECAST OF REVENUE TO ATC


HIGH INTENSITY DIRECTIONAL ACOUSTICS
- ------------------------------------

YEAR 1
R&D funding provided by / through General Dynamics [***] to ATC

YEARS 2--5
R&D funding provided by / through General Dynamics - [***] Scaleable Effect
Weapon Sales - [***]





For purposes of this Attachment C, [***] shall be established pursuant to
Section 2(i).



                                      C-1

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.28.1
<SEQUENCE>4
<FILENAME>atc_bath-exhibit.txt
<TEXT>
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission


                                                                 Exhibit 10.28.1

                        LICENSE AND REMARKETER AGREEMENT


         THIS AGREEMENT (the "Agreement") is entered into as of February 13,
2003 (the "Effective Date"), by and between American Technology Corporation,
located at 13114 Evening Creek Drive South, San Diego, California 92128 ("ATC"),
and Bath Iron Works Corporation, located at 700 Washington Street, Bath, Maine
04530 ("BIW").

         WHEREAS, ATC has developed or acquired and owns or has the right to
license, certain patent rights, technical information and know-how, including
trade secrets and copyrights therein, relating to the design, manufacture,
testing, operation and maintenance of certain transducers and high intensity
directed acoustics; and

         WHEREAS, BIW desires to obtain an exclusive, worldwide license to make,
have made, use and sell Products (defined below) and sell ATC Products (defined
below) for and to Customers (defined below) for Applications (defined below),
which use or incorporate the Technologies (defined below);

         NOW, THEREFORE, for and in consideration of the covenants and
undertakings herein provided, and other good and valuable consideration, the
receipt and sufficiency of which is reciprocally acknowledged, IT IS AGREED AS
FOLLOWS:

1.       DEFINITIONS.

         "Affiliate" means, with respect to any person or entity, any present or
future entity directly or indirectly controlling, controlled by, or under common
control with such person or entity. With respect to BIW, the term "Affiliates"
includes, but is not limited to, General Dynamics Corporation and any direct or
indirect subsidiary of General Dynamics Corporation.

         "Agreement Year" means, for the first Agreement Year, the period
commencing on the Effective Date and ending December 31, 2003, and thereafter,
each successive calendar year during the Term.

         "Applications" means the applications listed in Attachment A.

         "ATC Products" means the Products listed in Attachment B.

         "Claims" has the meaning specified in Section 9(a).

         "Customers" means the customers listed in Attachment A.

         "Components" means the components based on the Technologies and listed
on Attachment B.

         "Confidential Information" has the meaning specified in Section 10(a).

                                       1
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission

         "Improvements" means any and all improvements including but not limited
to findings, discoveries, inventions, additions, modifications, or changes to or
relating to the Technologies, Components or Products or to processes for
manufacturing, testing, operating or maintaining Products or Components.

         "Losses" has the meaning specified in Section 9(a).

         "Products" means any and all products using or incorporating any
Component or Technology, including without limitation ATC Products.

         "Technology" or "Technologies" means all inventions (whether or not
patentable), issued patents, pending applications for patents, and patents which
may be issued from current applications (including divisionals, reissues,
renewals, re-examinations, continuations, continuations in part and extensions),
technical knowledge and information, whether public or proprietary, including,
but not limited to, all drawings, bills of materials, specifications, manuals,
trade secrets, and proprietary or confidential technical information,
copyrightable works (whether or not copyrighted), software and computer
programs, electronic data files, manufacturing and production processes,
maintenance information, and any other such technical information owned by ATC
or which ATC has the right to license during the term of this Agreement and
relating to the technologies set forth on Attachment A. Technologies shall also
include any Improvements or copyrighted materials related to the foregoing
developed by or for ATC prior to or during the term of this Agreement or by BIW
during the term of this Agreement.

         "Term" means the term of this Agreement as specified in Section 4(a) as
may be extended pursuant to that section.

         "Trademarks" has the meaning specified in Section 2(f).

2.       LICENSE AND REMARKETING RIGHTS.

         (a) LICENSE GRANT. ATC hereby grants BIW, and BIW accepts, a worldwide,
exclusive, even as to ATC and except as to any Affiliate of BIW, license (with a
limited right to sublicense as set forth herein) to use the Technologies to
make, have made, use, import, export, sell, offer to sell, and/or service
Products, including but not limited to ATC Products, for exclusive use in the
Applications and for exclusive sale to the Customers listed on Attachment A;
provided, however, that all Products sold by BIW pursuant to this Agreement
shall include one (1) or more Components; provided further, that all Components
shall be acquired by BIW exclusively from ATC. BIW shall have the right to grant
sublicenses hereunder, without ATC's consent (i) to any of its Affiliates to the
full extent of BIW' s rights under this Agreement, and (ii) to any third party
for the purposes of having made, making, importing, exporting, repairing and
servicing Products. Nothing herein shall limit ATC's ability to sell items
directly to the United States government to the extent not otherwise in
violation of this Agreement or 48 C.F.R. 52.203-6.


                                       2
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission

         (b) COMPONENT PURCHASES. BIW agrees that all Components incorporated
into Products shall be acquired exclusively from ATC. With respect to Components
purchased other than for BIW's or a sublicensee's use for research, display or
demonstration purposes, ATC shall charge BIW or the sublicensee [***], as may be
amended from time to time, or [***]. ATC may add Components to Attachment B,
and, upon twenty (20) days prior written notice, change the list prices for
Components specified on Attachment B. BIW recognizes that ATC may manufacture
components having different features than the Components, and which incorporate
the Technologies, for applications other than the Applications and for customers
other than Customers. [***].

         (c) ATC PRODUCT PURCHASES. BIW and its sublicensees may purchase ATC
Products for resale with or without modification by BIW or its sublicensees.
With respect to ATC Products purchased other than for BIW's or a sublicensee's
use for research, display or demonstration purposes, ATC shall charge BIW and
its sublicensees the lower of thirty percent (30%) off the list prices shown in
Attachment B, as may be amended from time to time, or ATC's then current list
prices. In addition, ATC agrees that it shall not sell ATC Products to any other
entity at a price lower than that offered to BIW and any sublicensees without
modifying the price charged BIW and any sublicensees for future sales to match
the more favorable sales price. ATC may add ATC Products to Attachment B and
upon twenty (20) days prior written notice change the list prices for ATC
Products specified on Attachment B. BIW recognizes that ATC may manufacture
products having different features than the ATC Products, and which incorporate
the Technologies, for applications other than the Applications and for customers
other than Customers. [***].

         (d) ADDITIONAL CUSTOMERS. During the Term of this Agreement, BIW may
request ATC to add customers to the list of Customers in Attachment A by
submitting a request in writing to ATC. Such request shall inform ATC of the
nature of BIW's relationship with the proposed customer, and the basis for BIW's
request. ATC shall respond to such request within twenty (20) days subsequent to
its receipt, and the decision to grant such request shall be within the sole
discretion of ATC. Nothing in this Agreement shall restrict ATC from licensing
the Technologies or selling Components or Products (i) to persons other than
Customers or (ii) for applications not designated in Attachment A, on an
exclusive or non-exclusive basis.

         (e) IMPROVEMENTS TO THE TECHNOLOGIES. Improvements to the Technologies
developed solely by or on behalf of [***] shall be [***] (the "Developing
Party"), subject to the license grants made in Section 2(a) and in this Section
2(e). [***] a worldwide, non-exclusive, perpetual, fully paid-up, royalty-free
license (with the right to sublicense) to make, have made, use, sell, offer to
sell and/or service products using and/or incorporating any Improvement to the
Technologies developed by or on behalf of [***]. Each party shall promptly
disclose to the other party each of its Improvements. With respect to any
Improvement to the Technologies that is jointly developed by the parties or is
developed on behalf of both parties (with or without collaboration by either
party or both parties) ("Joint Improvements"), the parties agree that [***] in
and to any such Joint Improvement, as well as in and to any patent applications
and patents thereon in all countries, subject to the provisions hereof. [***].


                                       3
<PAGE>

         (f) TRADEMARK LICENSE. During the term of this Agreement, and
thereafter to the extent necessary to allow BIW and/or its sublicensees to
exercise their rights and fulfill their obligations under Section 4(b), ATC
hereby grants BIW a worldwide, non-exclusive, fully paid-up, royalty-free
license to use ATC's trademarks, trade names, logos, other distinguishing marks
of ATC (collectively, "Trademarks") and ATC marketing materials on or in
connection with Products which BIW or its sublicensees market or sell as
permitted by this Agreement; provided, however, that BIW shall at least maintain
ATC's quality standards in connection with Products and shall not intentionally
do or cause anything to be done to adversely affect ATC's rights in and to the
Trademarks. BIW shall not distribute any marketing materials that have not been
first approved by ATC, which approval shall not be unreasonably withheld.

         (g) DEMONSTRATION PRODUCTS AND MARKETING MATERIALS. ATC shall provide
BIW with demonstration Products as appropriate (but at least one (1)
demonstration unit of each existing and new Product), free of charge, as
mutually agreed, and with copies of its sales and marketing literature regarding
ATC and the Products as reasonably required by BIW, and with sufficient training
in the use of the Products to permit BIW to make effective sales presentations,
all at no charge to BIW. BIW and its sublicensees may purchase additional
Products and Components for their internal research, display and demonstration
purposes [***] shown in Attachment B. If BIW and ATC reasonably believe that
specialized marketing materials or demonstration Products are necessary in
connection with a particular potential Customer in an Application, ATC shall
provide such materials and support to BIW which shall reimburse ATC for such
materials and support [***]. Any request for payment by ATC pursuant to this
section shall be in writing and accompanied by a detailed description of ATC's
cost.

         (h) MARKETING ASSISTANCE. BIW shall provide reasonable display space
for Products at certain trade shows as mutually agreed to by the parties. In
addition, BIW shall use reasonable efforts to assist ATC with efforts to obtain
government/customer funding to further develop existing or new Products
employing the Technologies. BIW will not exert improper influence to solicit or
obtain government contracts, and has not represented to ATC that it is able to
obtain any government contract through improper influence. The parties agree and
acknowledge that use of government funds for development as contemplated
hereunder may preclude either party from exercising exclusive rights in certain
information related to new Products employing the technologies, and that
obtaining government funding may cause certain trade secret and patent rights to
be granted to the government, which in turn may permit the government to
disclose such information to third parties.

         (i) EXCLUSIVITY. BIW will provide ATC with annual good faith forecasts
of the dollar amount of purchases for each Component and ATC Product that BIW
expects BIW and its sublicensees to purchase from ATC. Each forecast shall
separately forecast sales with respect to each of the Technologies identified in
Attachment C. The forecast for the first Agreement Year is set forth on
Attachment C. On or before each annual anniversary of the Effective Date during
the term, BIW shall provide a good faith forecast of its dollar purchase

                                       4
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission

forecast per Technology for the next Agreement Year. Such purchase forecasts
will not be binding on BIW, except to the extent provided by this section with
respect to exclusivity. BIW and ATC will attempt to agree in good faith prior to
each Agreement Year on an aggregate dollar purchase forecast for the next
Agreement Year, taking into account prior year sales and prior year growth in
sales, new ATC Products and Components and anticipated new sales to Customers.
The license granted in Section 2(a) hereof shall become non-exclusive for a
particular Technology (and only for that Technology) if all of the following
conditions occur with respect to that Technology in a particular Agreement Year:
(i) the total dollar amount of purchase orders actually received from BIW and
all of its sublicensees for Components and ATC Products relating to that
Technology, plus any funding obtained from any source or provided for research
and development relating to that Technology, is less than [***] (the
"Exclusivity Threshold") and [***]; (ii) [***] is not attributable to any
material action, inaction or fault of ATC, or material government restrictions
on BIW's or its sublicencees' ability to sell the Products for use in
Applications or to sell to material Customers; and (iii) no Force Majeure Event
(as defined below) has prevented the achievement by BIW and its sublicensees of
the Exclusivity Threshold; provided, however, that the license granted in
Section 2(a) shall remain exclusive for all Technologies [***]. Purchases and/or
funding obtained [***].

         (j) MARKETING EFFORTS. BIW shall (i) create product and marketing
strategies for the Applications, (ii) market the Products and/or ATC Products to
Customers for the Applications, (iii) provide service consistent with the nature
of the business to the Customers, and (iv) assist ATC in identifying new
products based on the Technologies that may be appropriate for development at
ATC's discretion for the Customer Applications.

         3. INTERNAL USE PURCHASES. BIW and its sublicensees may purchase
Products and Components for their respective internal research, display and
demonstration purposes, and not for resale at the [***] described in Attachment
B. [***].

4.       TERM AND TERMINATION.

         (a) TERM. The initial term of this Agreement is for a period of five
(5) years from the Effective Date. BIW shall have the option of extending the
term for an additional five (5) years by providing ATC with at least thirty (30)
days' prior written notice of its intention to extend the term before the term
would otherwise expire. Notwithstanding the foregoing, BIW may terminate this
Agreement at any time without cause by providing ATC with at least sixty (60)
days' prior written notice of such termination.

         (b) RIGHTS ON TERMINATION. In the event that this Agreement is
terminated for any reason other than a breach by BIW, BIW and its sublicensees
shall continue to have the right to (i) resell ATC Products and Components, (ii)
manufacture and have manufactured Products pursuant to existing Customer
contracts, (iii) sell Products to exhaust its inventory of Components, ATC
Products and Products in existence at the date of termination and to fulfill
obligations under any existing Customer contracts, and (iv) provide maintenance
and related services to Customers using the Technology, Components, ATC Products
and Products; and BIW shall continue to have the right to grant sublicenses
hereunder for the purpose of exercising its rights under this Section 4(b).


                                       5
<PAGE>

         (c) EFFECT OF DEFAULT. In the event that either party defaults in the
performance of any of its material duties or obligations set forth in this
Agreement, and such default is not substantially cured within thirty (30) days
after written notice is given to the defaulting party specifying the default,
then the non-defaulting party may, by giving written notice thereof to the
defaulting party, terminate this Agreement as of the date specified in such
notice of termination.

         (d) EFFECT OF BANKRUPTCY. Any licenses granted hereunder shall not be
affected by a voluntary filing for bankruptcy or insolvency regarding either
party, or an involuntary filing not dismissed within ninety (90) days, or any
adjudication that either party is bankrupt or insolvent, or by the filing of any
petition or answer seeking reorganization, readjustment, or arrangement of the
business of either party under any federal or state law relating to bankruptcy
or insolvency, or by the appointment of a receiver for all or substantially all
of the property of either party, or by the making by either party of any
assignment or attempted. assignment for the benefit of creditors, or by the
institution of any proceedings for the liquidation or winding up of either
party's business. ATC acknowledges that in the event a petition for bankruptcy
of ATC is filed under federal bankruptcy law and this Agreement is rejected in
the bankruptcy proceedings, BIW may elect to retain its license rights as this
Agreement is an executory contract protected under Section 11 U.S.C. Section
365(n).

         (e) EFFECT OF TERMINATION. Upon the expiration or any termination of
this Agreement, the license granted hereunder to BIW shall terminate, except as
provided in Sections 2(e) and 4(b). BIW shall, except as provided hereunder,
thereupon cease and desist from making, having made, using, selling, and
distributing the Products, or using the Trademarks, and will likewise cease and
desist from any and all use of the Technology, including the proprietary rights
therein, subject to the rights granted to BIW in Sections 2(e) and 4(b), and BIW
shall have no further obligation hereunder. All proprietary information,
including Confidential Information, in whatever form, in the custody or control
of either party or any third-party contractor, bearing on the subject matter of
this Agreement or transferred incident to activities hereunder, shall be
returned to the disclosing party, or secured, or destroyed, as is reasonable in
each case in light of all circumstances, so as to enable the maintenance of
confidentiality with respect thereto, and preserve the value of the Confidential
Information to the parties.

5.       PERMITTED ACTIVITIES.

         (a) BIW'S ACTIVITIES. Nothing in this Agreement shall be construed to
prevent BIW from: (i) engaging in any activities with respect to products or
services competitive with those supplied by ATC or entering into agreements with
third parties having a similar purpose or similar terms to this Agreement; or
(ii) independently developing and/or selling any materials, products or services


                                       6
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission

which are similar to those of ATC as long as they do not infringe on any
existing ATC patents or patents that issue from pending ATC applications and
they were not developed using any ATC Confidential Information; or (iii) using
data, processing, techniques, ideas, and other know-how gained during the
performance of this Agreement in the furtherance of its business, to the extent
such use does not conflict with the confidentiality provisions of this
Agreement.

         (b) ATC'S PRICING. BIW recognizes that the Components, ATC Products and
Products targeted for the Applications herein are expected to be different in
quality and features than products that ATC has developed or may develop from
the Technologies for other markets and applications for consumers or industrial
customers or others. Except for the exclusivity relating to Applications,
Customers, Products, and ATC Products set forth herein, [***].

6.       REPRESENTATIONS AND WARRANTIES.

         (a) MUTUAL WARRANTIES. Each party to this Agreement represents and
warrants to the other party that: (i) such party has the full corporate right,
power and authority to enter into this Agreement and to perform all acts
required of it hereunder; (ii) the execution of this Agreement by such party,
and the performance by such party of its obligations and duties hereunder, do
not and will not violate any agreement to which such party is a party, or by
which it is otherwise bound; (iii) when executed and delivered by such party,
this Agreement will constitute the legal, valid and binding obligation of such
party, enforceable against such party in accordance with the terms and
conditions of this Agreement; (iv) it is not subject to any pending or
threatened litigation or governmental action that could materially interfere
with its performance of this Agreement; and (v) such party is in compliance with
and will comply with all applicable U.S. material laws, rules and regulations
with respect to its obligations under this Agreement. Neither party has been
induced to enter into this Agreement by any representations or promises not
specifically stated herein.

         (b) INTELLECTUAL PROPERTY WARRANTY. ATC represents and warrants to BIW,
its sublicensees and Customers that the exercise by BIW, its sublicensees and
Customers of rights granted under this Agreement will not infringe upon any
patent, trademark, copyright, trade secret, or other intellectual property or
proprietary right of any third party.

         (c) PRODUCT WARRANTY. ATC represents and warrants to BIW, its
sublicensees and Customers that the Components and ATC Products comply with the
highest industry standards and will be free from defects in materials and
workmanship for a period of one (1) year from the date of installation by BIW or
a sublicensee, or [***] from the date of shipment by ATC, whichever is earlier.
If a defect exists, ATC will (i) repair the defective item at no charge, using
new replacement parts or, if not prohibited under a government contract or by
law, refurbished replacement parts, (ii) exchange the item with an item that is
new or which has been manufactured from new or, if not prohibited under a
government contract or by law, serviceable used parts and is at least
functionally equivalent to the original item, or (iii) reimburse the total


                                       7
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission

amount paid for the defective item. A replacement or repaired item shall be
warranted for the remainder of the warranty period or [***] from the date the
replacement or repaired item is shipped from ATC, whichever provides longer
coverage. BIW, its sublicensee or a Customer (as applicable) shall deliver the
defective item, at its expense, to ATC at the address first written above. The
parties agree and acknowledge that BIW, its sublicensee or a Customer (as
applicable) shall be responsible for all loss or damage during shipment of an
item by them pursuant to this paragraph. Repaired or replaced items will be
shipped to BIW, its sublicensee or a Customer (as applicable) via the same
shipping method as they were received by ATC, at ATC's expense and risk of loss.

         (d) AUTHORIZED WARRANTIES. No agent, employee, or representative of BIW
has any authority to bind ATC to any affirmation, representation, or warranty
concerning the Components or the Products, unless such affirmation,
representation, or warranty is specifically included in this Agreement or in
another document generated by ATC which expressly authorizes BIW to make
specified warranties. Any unauthorized affirmation, representation, or warranty
shall not be enforceable by BIW or any subsequent buyer of any Components or
Products. BIW shall be liable for any representations or warranties made by it,
whether in writing or orally, other than those made by ATC herein, unless it
receives written approval from ATC.

         7. INTELLECTUAL PROPERTY ENFORCEMENT. Each of BIW and ATC shall notify
the other party in writing of any suspected or known infringement or
misappropriation of the Technology by a third party, and shall inform the other
party of any evidence in their possession of such infringement or
misappropriation, and provide details to the extent known of such infringement.

         (a) ACTION BY ATC. ATC shall have the option but not the obligation to
take such measures as may be required to terminate any infringement or
misappropriation by a third party. Any such action shall be at the sole expense
of ATC. ATC shall be entitled to all damages and settlement proceeds from third
parties resulting from any such proceeding. BIW shall provide any assistance
reasonably requested by ATC in the preparation and prosecution of that claim, at
the expense of ATC.

         (b) ACTION BY BIW. Should ATC decide to not pursue a Claim, as defined
in Section 9(a), against a third party for misappropriation or infringement
under Section 7(a), BIW shall be entitled to pursue such Claim. Any such Claim
shall be at the sole expense of BIW. BIW shall be entitled to all damages and
settlement proceeds from any third parties resulting from any such Claim. ATC
shall provide any assistance reasonably requested by BIW in the preparation and
prosecution of that Claim, at the expense of BIW.

         (c) JOINDER BY ATC. At its sole option, ATC may join as plaintiff in
any action brought to enforce a Claim by BIW brought pursuant to Section 7(b)
with respect to the Technologies. In such event, the parties shall share equally
the expenses of any such action. Each party shall be entitled to one-half of all
damages and settlement proceeds recovered after first reimbursing each party for
any amounts expended by them in the prosecution of such Claim.


                                       8
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission

         (d) SETTLEMENT. The settlement of any Claim involving any consent or
agreement allowing any third party any rights with respect to the intellectual
property of ATC shall require the prior written consent of ATC.

8.       LIMITATION OF LIABILITY.

         (a) MUTUAL LIMITATION OF LIABILITY. UNDER NO CIRCUMSTANCES WILL EITHER
PARTY, ITS AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES OR CUSTOMERS BE LIABLE TO
THE OTHER PARTY, ITS AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES OR CUSTOMERS FOR
ANY CONSEQUENTIAL, INDIRECT, SPECIAL, PUNITIVE OR INCIDENTAL DAMAGES OR LOST
PROFITS, WHETHER FORESEEABLE OR UNFORESEEABLE, ARISING OUT OF BREACH OF
CONTRACT, MISREPRESENTATION, NEGLIGENCE, STRICT LIABILITY IN TORT OR OTHERWISE,
EVEN IF THE PARTY HAS PREVIOUSLY BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. THIS EXCLUSION AND LIMITATION SHALL BE EFFECTIVE TO HE EXTENT PERMITTED
BY APPLICABLE LAW.

         (b) LIMITATION OF PRODUCT WARRANTY LIABILITY. THE PRODUCT WARRANTY AND
REMEDIES SET FORTH ABOVE ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES,
REMEDIES AND CONDITIONS, WHETHER ORAL OR WRITTEN, EXPRESS OR IMPLIED, REGARDING
PRODUCT MATERIALS AND WORKMANSHIP. ATC SPECIFICALLY DISCLAIMS ANY AND ALL
IMPLIED WARRANTIES, INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE. IF ATC CANNOT LAWFULLY DISCLAIM IMPLIED
WARRANTIES, ALL SUCH WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE, ARE LIMITED IN DURATION TO THE DURATION OF THE
PRODUCT WARRANTY. NO ATC LICENSEE, DISTRIBUTOR, RETAILER, INSTALLER, OR EMPLOYEE
IS AUTHORIZED TO MAKE ANY MODIFICATION, EXTENSION, OR ADDITION TO THE PRODUCT
WARRANTY. ATC SHALL NOT BE LIABLE FOR, NOR SHALL THE PRODUCT WARRANTY INCLUDE OR
APPLY TO, LOSS OR DAMAGE CAUSED BY OR RESULTING FROM ANY OF THE FOLLOWING: (i)
IMPROPER INSTALLATION OF THE PRODUCT OR THE FAILURE BY A PARTY OTHER THAN ATC TO
INSTALL THE PRODUCT IN STRICT COMPLIANCE WITH ATC'S SPECIFICATIONS; (ii)
IMPROPER OPERATION OR USE OF THE PRODUCT; (iii) USE OF THE PRODUCT BEYOND ITS
RATED CAPACITY OR SPECIFICATIONS; (iv) IMPROPER OR UNAUTHORIZED MODIFICATION,
ALTERATION OR REPAIR; (v) A FORCE MAJEURE EVENT (AS DEFINED BELOW); OR (vi) THE
ENFORCEMENT OF ANY LAW OR ORDINANCE REGULATING USE OF THE PRODUCT, EXCEPT FOR
ANY LAW OR ORDINANCE IN EFFECT AS OF THE EFFECTIVE DATE. For purposes of this
Section 8(b), BIW shall be considered an authorized agent of ATC.


                                       9
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission

9.       INDEMNITY.

         (a) INTELLECTUAL PROPERTY INDEMNITY BY ATC. ATC shall defend, hold
harmless, and indemnify BIW, its Affiliates, its sublicensees and their
respective employees, directors, officers, contractors, subcontractors,
customers, attorneys, partners and agents ("BIW Indemnitees") from and against
any and all damages, judgments, liabilities, payments made in settlement, costs,
and expenses, including reasonable attorneys' fees (collectively, "Losses") for
claims, actions or proceedings ("Claims") arising out of ATC's breach of any
warranty set forth in this Agreement or alleging that BIW Indemnitees' use of a
Product, ATC Product, Component or any of the Technologies infringes or violates
any patent, copyright, trade secret, license, or other intellectual property
right of any third party, provided that a BIW Indemnitee promptly notifies ATC
of any such Claim. ATC shall have control over the defense or settlement of such
Claim, except that BIW Indemnitees may participate in the defense of any such
suit or proceeding through counsel of their choice and at their expense. The BIW
Indemnitees shall provide ATC such reasonable assistance as ATC may require, at
ATC's expense, in defending or settling such Claim. In the event that a Product,
ATC Product, Component or any of the Technologies, or any portion thereof, is
held to constitute an infringement and its use is enjoined, ATC may, at its
option and expense, (i) modify the infringing Product, ATC Product, Component or
Technology so that it or they are non-infringing, (ii) procure for BIW the right
to continue to use the infringing Product, ATC Product, Component or Technology,
or (iii) replace the Product, ATC Product, Component or Technology with
functionally equivalent, non-infringing replacement products or technologies.
Notwithstanding the foregoing, this indemnification shall not apply if the
claimed infringement is attributable solely to a BIW Indemnitee's use of the
Product, ATC Product, Component or Technology in combination with other products
such that the Product, ATC Product, Component or Technology would not be
infringing apart from its use in the combination, or if such Claim arises from
ATC's compliance with BIW's designs, specifications or instructions, or from
BIW's or a sublicensee's modification of the Product, ATC Product, Component or
Technology and, in both instances, the Claim could not be brought but for
compliance with BIW's designs, specifications or instructions or the
modification by BIW or the sublicensee.

         (b) GENERAL INDEMNITY BY ATC. ATC shall defend, hold harmless, and
indemnify the BIW Indemnitees from and against any and all Losses (including,
but not limited to, damages for injury to or death of employees or other
individuals or destruction of property) arising directly or indirectly from or
in connection with any breach of this Agreement, negligence, gross negligence or
willful misconduct by ATC or its agent, provided that a BIW Indemnitee promptly
notifies ATC of any such Claim. ATC shall have control over the defense or
settlement of such Claim, except that BIW Indemnitees may participate in the
defense of any such suit or proceeding through counsel of their choice and at
their expense. The BIW Indemnitees shall provide ATC such reasonable assistance
as ATC may require, at ATC's expense, in defending or settling such Claim.


                                       10
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission

         (c) GENERAL INDEMNITY BY BIW. BIW agrees to defend, hold harmless and
indemnify, at its sole expense, ATC and its Affiliates and their employees,
directors, officers, contractors, subcontractors, attorneys, partners, agents,
successors and assigns ("ATC Indemnitees") from and against any and all Losses
(including, but not limited to, damages for injury to or death of employees or
other individuals or destruction of property) arising directly or indirectly
from or in connection with (i) the incorporation of any Components into products
by BIW or a sublicensee if such Claim could not have arisen but for such
incorporation, (ii) any breach of this Agreement by BIW, and (iii) negligence,
gross negligence or willful misconduct by BIW or its sublicensees, provided that
an ATC Indemnitee promptly notifies BIW of any such Claim. BIW shall have
control over the defense or settlement of such Claim, except that ATC may
participate in the defense of any such Claim through counsel of its choice and
at its own expense. The ATC indemnitees shall provide BIW such assistance as BIW
may require, at BIW's expense, in defending or settling such Claim. The parties
agree and acknowledge that BIW shall under no circumstances defend, hold
harmless or indemnify any ATC Indemnitee hereunder for a Claim arising out of or
related to a breach of this Agreement, negligence, gross negligence or willful
misconduct on the part of ATC or its agent, or arising out of any warranty or
indemnity obligations of ATC.

10.      CONFIDENTIALITY.

         (a) NONDISCLOSURE. Each party agrees to protect the confidentiality of
any information concerning the other party, the other party's customers
(including without limitation Customer information provided to ATC by BIW under
Section 2(d)), trade secrets, business methods, processes, or procedures, or
other information learned during the course of performance under this Agreement
and marked "Confidential," and any information transferred incident to any prior
non-disclosure agreement between the parties, including without limitation the
non-disclosure agreement dated March 22, 2002 (collectively, the "Confidential
Information"), with the same degree of care that it regularly uses to protect
its own similar confidential information, and to use the other party's
Confidential Information solely for the purpose of carrying out this Agreement.
The parties agree and acknowledge that each has received Confidential
Information from the other in expectation of entering into this Agreement. If
the party receiving Confidential Information from the other is required by any
governmental authority (other than a Customer in connection with BIW's sale of
Products or ATC Products) or court order to disclose the disclosing party's
Confidential Information to a third party, the receiving party shall promptly
advise the disclosing party of the requirement or order to permit the disclosing
party the opportunity to object and/or seek other relief.

         (b) EXCEPTIONS. With reference to Section 10(a), Confidential
Information shall not include: (i) information that becomes generally known to
the public other than as a result of breach of this Agreement; (ii) information
that a party can show through written documentation was known to it prior to
such party receiving such information in connection with this Agreement; (iii)
information a party lawfully receives from a third party without any restriction
or obligation of confidentiality with respect to such information; (iv)
information that was developed or obtained independently of and without
connection to this Agreement; and (v) a first party's information that a first
party discloses to a third party without any obligation to maintain the
confidentiality of the disclosed information.


                                       11
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission

         (c) OBLIGATIONS UPON TERMINATION. Except as necessary for BIW and its
sublicensees to exercise their rights and fulfill their obligations as set forth
in Section 4(b) of this Agreement, and excluding any Confidential Information
included in a contractual deliverable to a Customer, all Confidential
Information, in whatever form, in the custody or control of a receiving party or
any third-party contractor, transferred incident to activities under this
Agreement or under any predecessor agreement between the parties, including
without limitation the non-disclosure agreement dated March 22, 2002, shall be
returned to the disclosing party or secured or destroyed, at the disclosing
party's option, upon the termination or expiration of this Agreement.

         11. AUDIT RIGHTS. BIW shall maintain records for two (2) years
following the date of the payments to which such records pertain, sufficient to
allow verification of compliance with the terms of this Agreement and the
accuracy of payments made by BIW to ATC hereunder. An independent auditor
mutually agreeable to ATC and BIW shall be permitted, [***], to audit such
records during normal business hours upon fourteen (14) days prior written
notice. Such audit shall be subject to the confidentiality terms of this
Agreement. [***] shall bear the cost and expense of such audit, [***]. BIW shall
promptly pay ATC all underpayments; provided, however that BIW shall have no
obligations to pay any such underpayments to ATC which BIW in good faith
believes are not properly owed, provided that the issue of whether any such
purported underpayment is owed is the subject of a pending dispute resolution
procedure as provided by Section 14(k).

         12. NONSOLICIT. Neither party shall recruit or solicit employees or
independent contractors of the other party until [***] after the end of the Term
of this Agreement without the advance written consent of the other party.

13.      GENERAL.

         (a) SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.

         (b) FORCE MAJEURE. Neither Party shall be liable or deemed to be in
default for any delay, interruption, or failure in performance under this
Agreement resulting from the following events: acts of God, acts of civil or
military authority; acts of the public enemy; war; accidents, fires, explosions,
power surges, earthquakes, floods, or unusually severe weather; strikes or labor
disputes; delays in transportation or delivery outside the reasonable control of
the affected party; epidemics; and any similar event beyond the affected party's
reasonable control ("Force Majeure Event"). The party whose performance is
affected by a Force Majeure Event will use reasonable efforts to avoid, remove
or minimize the impact of such event on the performance of its obligations at
the required level at the earliest possible date. If either party is, or
anticipates it is likely to be, delayed or prevented from performing its
obligations in connection with a Force Majeure Event, such party will notify the
other party within ten (10) business days after such party first becomes aware
of such Force Majeure Event.

                                       12
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission

         (c) NO AGENCY. The relationship between ATC and BIW is only that of
independent contractors. Nothing in this Agreement shall be construed or
interpreted as creating an agency, joint venture, or partnership relationship
between the parties. Neither party shall have, nor shall it hold itself out as
having any right, power, or authority to create any contract or obligation,
either express or implied, on behalf of, in the name of, or binding upon the
other party or to pledge the other party's credit, or to extend credit in the
other party's name unless that party consents thereto in advance in writing. BIW
may appoint or otherwise designate suitable sales representatives, employees,
and agents ("Representatives") to perform BIW's obligations. BIW shall be solely
responsible for its Representatives and their acts.

         (d) PUBLIC RELEASES. Except as provided in Section 2(f) of this
Agreement or as required by law or regulation, neither party may use the
trademarks or trade names of the other party or issue a news release, public
announcement, advertisement, or other form of publicity concerning the existence
of this Agreement or the services to be provided under this Agreement without
obtaining prior written approval from the other party.

         (e) ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Except as expressly permitted by this Agreement, neither party shall
assign, sublicense, delegate, or transfer any of its rights or obligations
hereunder without the prior written consent of the other party. Provided,
however, that both parties shall be allowed to assign this Agreement without the
other's consent to an Affiliate or as part of any reorganization or purchase of
substantially all of the assets of or ownership interest in, the assigning
party. This Agreement shall be binding upon, and inure to the benefit of, each
party and its respective successors and permitted assigns.

         (f) WAIVER. The failure of either party to insist upon the performance
of any provision herein or to exercise any right or privilege granted to it
hereunder, shall not be construed as a waiver of such provision or any
provisions herein, and the same shall continue in full force. The various rights
and remedies given to or reserved by either party herein or allowed by law,
shall be cumulative, and no delay or omission to exercise any of its rights
shall be construed as a waiver of any default or acquiescence, nor shall any
waiver of any breach of any provision be considered the condoning of any
continuing or subsequent breach of the same provision.

         (g) AMENDMENTS, MODIFICATIONS AND SUPPLEMENTS. Any amendment,
modification, supplement or change hereto must be in writing and signed by the
parties hereto. No other act, document, usage or custom shall be deemed to amend
or modify this Agreement.


                                       13
<PAGE>

         (h) GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with the laws of the state of New York without giving effect to
conflict-of-laws principles thereof. Each party consents to the personal
jurisdiction in the state and federal courts in the state of New York and agrees
not to commence any actions arising out of or relating to this Agreement in any
other state.

         (i) NOTICES. All notices required to be sent hereunder shall be in
writing and shall be deemed to have been given on: (i) the, date sent by
confirmed facsimile, (ii) the date it was delivered by courier, or (iii) if by
certified mail return receipt requested, the date received, to the addresses and
to the attention of the persons set forth below, or to such other address or
individual as the parties may specify from time to time by written notice to the
other party:

    ------------------------------ -----------------------------------------
    If to ATC:                     American Technology Corporation
                                   Attention:  Terry Conrad
                                   13114 Evening Creek Drive South
                                   San Diego, California 92128
                                   Phone:  (858) 679-2114  Fax: (858) 679-0545
    ------------------------------ -----------------------------------------

    With a copy to:
    ------------------------------ -----------------------------------------
    If to BIW                      James Baskerville
                                   Vice President, Surface Ship Support and
                                   Advanced Technology
                                   Bath Iron Works Corporation
                                   700 Washington Street
                                   Bath, ME 04530

                                   Phone: (207) 442-3613 Fax: (207) 442-3478
    ------------------------------ ---------------------------------------------
    With a copy to                 General Counsel
                                   Bath Iron Works Corporation
                                   700 Washington Street
                                   Bath, ME 04530

                                   Phone: (207) 442-5841 Fax: (207) 442-5592
    ------------------------------ ---------------------------------------------

         (j) COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same document. The exchange of a fully
executed Agreement (in counterparts or otherwise) by facsimile shall be
sufficient to bind the parties to the terms and conditions of this Agreement.

         (k) ARBITRATION. Except with respect to claims regarding a breach of
obligations related to Confidential Information or infringement of intellectual
property rights, including without limitation the right of a party to apply to a
court of competent jurisdiction for a temporary restraining order, preliminary
injunction or other equitable relief to preserve the status quo or to prevent
irreparable harm, all claims, disputes, controversies, or other matters in
question arising out of or relating to this Agreement that cannot be resolved by


                                       14
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission

the parties through face-to-face negotiations, first between the respective
manager for each party involved in the day-to-day performance of this Agreement,
and then, if still not resolved, between senior executives of each party, will
be settled by binding arbitration in accordance with the Commercial Rules
("Rules") of the American Arbitration Association then in effect. All
arbitration proceedings will be held in New York, New York, and will be
conducted by a single arbitrator mutually agreed upon by the parties, provided,
however, that in the event the parties cannot agree on an arbitrator, each party
shall choose one arbitrator and the two arbitrators shall choose a third
arbitrator and the arbitration proceedings shall be conducted by the foregoing
panel of three arbitrators. If the two initial arbitrators cannot agree upon a
third arbitrator within ten days after the appointment of the second arbitrator,
the third arbitrator shall be selected in accordance with the Rules. The parties
may take discovery by any means allowed by the Federal Rules of Civil Procedure
then in effect. The arbitrator may exclude from evidence any evidence not
previously shared with the other side. The cost of any arbitration or litigation
will be borne equally by the parties pending the arbitrator's awards. The
prevailing party in any arbitration proceeding or litigation hereunder will be
entitled, in addition to any other relief granted to it, to recover reasonable
attorneys' fees and the costs incurred in connection with the arbitration or
litigation. The arbitrator shall be bound by the express provisions set forth in
this Agreement and by the substantive law of the courts of New York that relate
to any controversy arising from this Agreement, and shall not modify any terms
of this Agreement or make any award of damages in excess of the amounts set
forth in this Agreement or grant any relief not expressly set forth in this
Agreement. The determinations of the arbitrator shall be final and, except as
provided by law, shall not be subject to judicial review. Any court of competent
jurisdiction may enforce any award or determination rendered by the arbitrator.

         (l) HEADINGS. The headings and sub-headings included in this Agreement
are for convenience only and do not in any way alter or affect the terms of this
Agreement.

         (m) ENTIRE AGREEMENT. This Agreement, together with any exhibits and
any attachments hereto, sets forth the entire agreement of the parties with
respect to the subject matter hereof, and supersedes any prior agreement or
understandings, including without limitation the non-disclosure agreement
between the parties dated March 22, 2002. If any provision hereof is held to be
invalid, void, or unenforceable, the remainder of the provisions shall
nevertheless remain unimpaired and in effect.

         (n) SURVIVAL. The following Sections of this Agreement shall survive
the expiration or any termination of this Agreement: 2(e), 4(a), 4(b), 4(e),
6(a), 6(b), 6(c), 6(d), 8(a), 8(b), 9(a), 9(b), 9(c), 10(a), 10(b), 19(c), 11
and 12.


                                       15
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission


         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective duly authorized representative
effective on the date and year first written above.

AMERICAN TECHNOLOGY CORPORATION

By:   /S/ TERRY CONRAD
      --------------------------------
Name: Terry Conrad
Title:   President

BATH IRON WORKS CORPORATION

By:   /S/ JAMES P. O'HARE
      --------------------------------
Name: James P. O'Hare
Title:   Director, Contracts/Estimating



                                       16
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission



                                  ATTACHMENT A
                                  ------------

               LISTING OF TECHNOLOGIES, CUSTOMERS AND APPLICATIONS


TECHNOLOGIES
- ------------

o        NeoPlanar(R)technology as characterized by the [***] installation


CUSTOMERS
- ---------

DoD including:
         o        US Army
         o        US Navy
         o        US Marine Corps
         o        US Air Force
         o        SOCOM
         o        DARPA
         o        DTRA
         o        National Laboratories (Sandia, Livermore, etc.)

Dept. of Homeland Security including: o US Coast Guard
         o        Immigration and Naturalization Service / Border Patrol
         o        Customs Service
         o        Federal Protective Services
         o        Transportation Security Agency

Other Federal, State and Local Agencies / organizations / entities
         o        National Guard
         o        Embassies
         o        Federal and State Prisons
         o        DOE/U.S. Power Plants
         o        DEA
         o        CIA
         o        Federal, state and local law enforcement agencies



                                       17
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission


                                  ATTACHMENT A
                                  ------------

                LISTING OF CUSTOMERS AND APPLICATIONS (CONTINUED)


APPLICATIONS - COMMUNICATIONS
- -----------------------------

o        Shipboard communications, interior & exterior
o        Submarine communications, interior & exterior
o        Wheeled and tracked vehicles interior communications systems
o        Hanger facilities (land and ship based)
o        USAF cargo aircraft interior communications
o        US Army / USMC forts / camps outdoor communications
o        USN shipyard outdoor communications
o        US Army / USMC / US Navy semi-covert voice communications
o        US Army / USMC tunnel communications
o        Specialized communications in Combat Information Centers (multi-branch
         applications)
o        Electronic Sentry System applications o Man-mobile, manned and
         unmanned vehicle, or fixed installations / applications



                                       18
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission


                                  ATTACHMENT B
                                  ------------


ATC PRODUCTS LIST PRICES (AS OF SEPTEMBER 1, 2002)*
- ---------------------------------------------------

MILITARY LONGSPEAKER (CONSISTING OF 9-24" TRANSDUCERS WITHOUT INTERNAL
- ----------------------------------------------------------------------
AMPLIFIER)--FINISHED UNIT
- -------------------------
         [***]

FUTURE PRODUCTS
- ---------------
         [***]

*BIW, its Affiliates and sublicensees can purchase these Products for their
internal use [***]


COMPONENTS LIST PRICES (AS OF SEPTEMBER 1. 2002)**
- --------------------------------------------------

NEOPLANAR(R) TRANSDUCER COMPONENTS
- ---------------------------------
         [***]


** BIW, its Affiliates and sublicensees can purchase Products and Components for
their internal use [***]. This shall also apply to future products using
Components that BIW, its Affiliates and sublicensees purchase for internal use.




For purposes of this Attachment B, [***].

ATC may add ATC Products and/or Components to this Attachment B from time to
time.


                                       19
<PAGE>
     ***Confidential Portions of this document have been redacted and filed
                         separately with the Commission


                                  ATTACHMENT C
                                  ------------

                           FORECAST OF REVENUE TO ATC

YEAR 1 (Year 1 shall be October 1, 2002, through the day before the first
anniversary of the Effective Date)

[***]

YEAR 2

Year two financial forecast-- [***] to ATC

YEARS 3--5

[***]



For purposes of this Attachment C, [***] shall be established pursuant to
Section 2(i).

                                       20


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.28.2
<SEQUENCE>5
<FILENAME>atc_10kex10-282.txt
<TEXT>
<PAGE>
                                                                 EXHIBIT 10.28.2

GENERAL DYNAMICS
Armament and Technical Products

September 23, 2003
In response reply to 03DAP09-0025

American Technology Corporation
13114 Evening Creek Drive S.
San Diego, CA 92128 USA

Attention: Terry Conrad/Carl Gruenler

Reference: License and Remarketer Agreement between American Technology
Corporation ("ATC") and Bath Iron Works Corporation (BIW), dated February 13,
2003 ("License").

Effective September 4, 2003, the referenced License was assigned, pursuant to
Article 13(e) therein, from BIW to its Affiliate, General Dynamics Armament and
Technical Products, Inc., located at 128 Lakeside Avenue, Burlington, Vermont
05401-4985 ("GDATP").

Pursuant to Article 13(i) of the License, GDATP requests all future notices be
delivered to:

     Director of Contracts
     General Dynamics Armament and Technical Products, Inc.
     128 Lakeside Avenue
     Burlington, Vermont 05401-4985     Fax: (802) 657-7203

With a copy to:

     General Counsel
     General Dynamics Armament and Technical Products, Inc.
     128 Lakeside Avenue
     Burlington, Vermont 05401-4985     Fax: (802) 657-6590

Please direct any questions to the undersigned.

Sincerely,


/s/ Duane A. Patrick

Duane A. Patrick
Manager, Contracts Operations



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.29
<SEQUENCE>6
<FILENAME>atc_10kex10-28.txt
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.29

[AMERICAN TECHNOLOGY CORPORATION LOGO]


August 28, 2003, as amended (October 20, 2003)

Kalani Jones
Address:

Dear Kalani:

American Technology Corporation ("ATC") is pleased to present you with this
employment offer under the following terms and conditions:

Title:                     Senior Vice President of Operations

Start Date:                September 8, 2003

Annual Base Salary:        $140,000.00 (review by the Board of Directors-March
                           2004)

Bonus:                     30% annual performance based bonus: (determined by
                           Board of Directors)

Stock Options:             You will receive 75,000 stock options with an
                           exercise price of the fair market value on your first
                           day of employment (9/8/03). The options will vest
                           quarterly over a 2-year period beginning after 6
                           months of employment. /s/KJ (INITIAL)

Travel & Entertainment:    A budget will be established for T&E per Company
                           forecasts.

Benefits:                  Medical and dental insurance, ATC will provide
                           coverage in terms stated in our Policy Manual.
                           Premiums for both medical and dental insurance for
                           employee and dependents are covered at 100% for HMO
                           levels. If available, the employee can elect to
                           upgrade the coverage at the cost to the employee.
                           Benefits commence on first day of the month of
                           employment. Life insurance coverage is part of the
                           Dental plan and is covered by ATC.

                           ATC observes 9 paid holidays per calendar year. Our
                           Personal Days Off ("PDO") policy is a combination of
                           vacation and sick days. PDO hours are accrued per pay
                           period. Your schedule is as follows:

                           Year one - 3 weeks or 4.62 hours per pay period;
                           Year five - 4 weeks or 6.15 hours per pay period.

                           Vacation Accruals (PDO) will max out at 200 hours.

                           A 401k package is available with multiple investment
                           options and a company match of 25% of Employees
                           deferral up to 6%.

Position Description:      This position will be responsible for directing
                           resources in the development, manufacture and
                           distribution of quality products to a diverse
                           customer base, while meeting or exceeding corporate
                           profit and strategic goals.

Policy Manual:             Additional terms of your employment may be set forth
                           in ATC's Policy Manual, as revised from time to time.

<PAGE>


Arbitration:               You will be required to sign the attached Mutual
                           Agreement to Arbitrate ("Arbitration Agreement").
                           (see exhibit)

You are entitled to all the published benefits of the company including, but not
limited to those listed above. You are subject to a review after your completion
of the 90-day probationary period to determine satisfaction of fulfilling job
responsibilities as directed by James Irish, CEO. After successful completion of
the probationary period and review you are eligible for time off accrued during
the probationary period.

Please sign this offer in the space provided below signifying that you have read
and accept the terms herein. Let me say that everyone at ATC is looking forward
to having a person of your caliber join the team and hope you feel welcome.

Sincerely,                                                    /s/ KALANI JONES
                                                              ----------------
                                                              Kalani Jones
/s/ RENEE WARDEN
Renee Warden
Director of Human Resources




CEO Reviewed:
              ---------

<PAGE>


                          MUTUAL AGREEMENT TO ARBITRATE

         This Mutual Arbitration Agreement ("Agreement") is entered into between
American Technology Corporation ("the Company") and the employee named below
("Employee").

AGREEMENT TO ARBITRATE CERTAIN DISPUTES AND CLAIMS
- --------------------------------------------------

         Except as specified below, we agree to arbitrate before a single
neutral arbitrator any and all disputes or claims arising from or relating to
Employee's recruitment to or employment with the Company, or the termination of
that employment, including claims against any current or former agent or
employee of the Company, whether the disputes or claims arise in tort, contract,
or pursuant to a statute, regulation, or ordinance now in existence or which may
in the future be enacted or recognized, including, but not limited to, the
following claims:
o        claims for fraud, promissory estoppel, fraudulent inducement of
         contract or breach of contract or contractual obligation, whether such
         alleged contract or obligation be oral, written, or express or implied
         by fact or law;

o        claims for wrongful termination of employment, violation of public
         policy and constructive discharge, infliction of emotional distress,
         misrepresentation, interference with contract or prospective economic
         advantage, defamation, unfair business practices, injury suffered as a
         result of Employee's performance or non-performance of his or her
         duties, and any other tort or tort-like causes of action relating to or
         arising from the employment relationship or the formation or
         termination thereof;

o        claims of discrimination, harassment, or retaliation under any and all
         federal, state and/or municipal statutes, regulations, or ordinances
         that prohibit discrimination, harassment, or retaliation in employment,
         as well as claims for violation of any other federal, state, or
         municipal statute, regulation, or ordinance, except as set forth
         herein; and

o        claims for non-payment or incorrect payment of wages, commissions,
         bonuses, severance, employee fringe benefits, stock options and the
         like, whether such claims be pursuant to alleged express or implied
         contract or obligation, equity, the California Labor Code, the Fair
         Labor Standards Act, the Employee Retirement Income Securities Act, and
         any other federal, state, or municipal laws concerning wages,
         compensation or employee benefits.

o        claims for infliction of emotional distress, misrepresentation,
         interference with contract or prospective economic advantage, violation
         of public policy, defamation, unfair business practices, invasion of
         privacy, and any other tort or tort-like causes of action relating to
         or arising from the employment relationship or the formation or
         termination thereof.

o        claims arising out of or relating to the grant, exercise, vesting
         and/or issuance of equity in the Company or options to purchase equity
         in the Company.

We understand and agree that arbitration of the disputes and claims covered by
this Agreement shall be the sole and exclusive mechanism for resolving any and
all existing and future disputes or claims arising out of Employee's recruitment
to or employment with the Company or the termination thereof, except as
specified below.

CLAIMS NOT SUBJECT TO ARBITRATION
- ---------------------------------

We further understand and agree that the following disputes and claims are not
covered by this Agreement and shall therefore be resolved as required by the law
then in effect:
o        Employee's claims for workers' compensation benefits, unemployment
         insurance, or state or federal disability insurance.

<PAGE>

o        Either party's claims concerning the validity, infringement,
         enforceability, disclosure or misappropriation of any trade secret,
         patent right, copyright, trademark, or any other intellectual or
         confidential property held or sought by Employee or the Company.

o        Either party's request for temporary injunctive relief prior to
         resolution of the dispute on its merits in an arbitration proceeding.

o        Any other dispute or claim that has been expressly excluded from
         arbitration by statute or binding legal precedent.

o        Any claims which, as a matter of law then in effect, cannot be the
         subject of a mandatory arbitration agreement.

Nothing in this Agreement should be interpreted as restricting or prohibiting
the Employee from filing a charge or complaint with a federal, state, or local
administrative agency charged with investigating and/or prosecuting complaints
under any applicable federal, state or municipal law or regulation. Any dispute
or claim that is not resolved through the federal, state, or local agency must
be submitted to arbitration in accordance with this Agreement.

FINAL AND BINDING ARBITRATION; WAIVER OF TRIAL BEFORE COURT, JURY OR GOVERNMENT
- -------------------------------------------------------------------------------
AGENCY
- ------

We understand and agree that the arbitration of disputes and claims under this
Agreement shall be instead of a trial before a court or jury or a hearing before
a government agency. We understand and agree that, by signing this Agreement, we
are expressly waiving any and all rights to a trial before a court or jury or
before a government agency regarding any disputes and claims which we now have
or which we may in the future have that are subject to arbitration under this
Agreement, except as provided in the preceding section.

ARBITRATION PROCEDURES
- ----------------------
Any arbitration held under this Agreement shall be conducted before a single
neutral arbitrator and shall be administered by JAMS, unless the parties
otherwise stipulated. The party initiating arbitration must provide written
notice of the request to arbitrate to the other party and to JAMS within the
applicable statute(s) of limitations. Written notice to the Company is to be
directed to the Company's Human Resources Department. The arbitration shall be
conducted in accordance with the JAMS Employment Arbitration Rules and
Procedures (the "JAMS Rules") in effect at the time of the arbitration;
provided, however, that the arbitrator shall allow the discovery authorized by
California Code of Civil Procedure section 1283.05 or any other discovery
required by California law. The parties shall attempt to jointly select the
single neutral arbitrator. If they are unable to reach agreement, the procedures
contained in the JAMS Rules shall apply, or JAMS shall appoint the single
arbitrator. To the extent that any of the JAMS Rules or anything in this
Agreement conflicts with any arbitration procedures required by California law,
the arbitration procedures required by California law shall govern.

PLACE OF ARBITRATION
- --------------------
The arbitration shall take place in San Diego County, California, or, at the
Employee's option, in the county in which the Employee works, or last worked,
for the Company. The parties may agree to hold the arbitration at any other
place mutually agreeable to both of them.

DISCOVERY
- ---------
The arbitrator shall allow the discovery authorized by California Code of Civil
Procedure section 1283.05 or any other discovery required by California law.

WRITTEN ARBITRATION AWARD
- -------------------------
The Arbitrator shall issue a written Award that sets forth the essential
findings and conclusions on which the Award is based. The Arbitrator shall have
the authority to award any relief authorized by law in connection with the
asserted claims or disputes. The Arbitrator's Award shall be final and binding

<PAGE>


on both the Company and Employee and it shall provide the exclusive remedy(ies)
for resolving any and all disputes and claims subject to arbitration under this
Agreement. The Arbitrator's Award shall be subject to correction, confirmation,
or vacation, as provided by California Code of Civil Procedure Section 1285.8 ET
SEQ and any applicable California case law setting forth the standard of
judicial review of arbitration Awards.

GOVERNING LAW
- -------------
We understand and agree that this Agreement and its validity, construction and
performance shall be governed by the laws of the State of California, without
reference to rules relating to conflicts of law. We further understand and agree
that any dispute(s) and claim(s) to be arbitrated under this Agreement shall be
governed by the laws of the State of California, without reference to rules
relating to conflicts of law.

COSTS OF ARBITRATION
- --------------------
We agree that the Company will bear the arbitrator's fee and any other type of
expense or cost that the employee would not be required to bear if he or she
were free to bring the dispute(s) or claim(s) in court as well as any other
expense or cost that is unique to arbitration. If the Employee is the party
initiating arbitration, he or she will be required to contribute to the
administrative costs of the arbitration the same amount which he or she would
have paid as a filing fee in order to commence the action in a civil court of
law. The Company and Employee shall each bear their own attorneys' fees incurred
in connection with the arbitration, and the arbitrator will not have authority
to award attorneys' fees unless a statute or contract at issue in the dispute
specifically authorizes the award of attorneys' fees to the prevailing party, in
which case the arbitrator shall have the authority to make an award of
attorneys' fees as required or permitted by applicable law. If there is a
dispute as to whether the Company or Employee is the prevailing party in the
arbitration, the Arbitrator will decide this issue.

SEVERABILITY
- ------------
We understand and agree that if any term or portion of this Agreement shall, for
any reason, be held to be invalid or unenforceable or to be contrary to public
policy or any law, then the remainder of this Agreement shall not be affected by
such invalidity or unenforceability but shall remain in full force and effect,
as if the invalid or unenforceable term or portion thereof had not existed
within this Agreement.

COMPLETE AGREEMENT
- ------------------
We understand and agree that this Agreement contains the complete agreement
between the Company and Employee regarding the subjects covered in it; that it
supersedes any and all prior representations and agreements between us, if any;
and that it may be modified only in a writing, expressly referencing this
Agreement and Employee by full name, and signed by the Chief Executive Officer
of the Company. Any such written modification must also state the intention of
the parties to modify this Arbitration Agreement.

KNOWING AND VOLUNTARY AGREEMENT
- -------------------------------
We have been advised to consult with attorneys of our own choosing before
signing this Agreement, and we have had an opportunity to do so. We agree that
we have read this Agreement carefully and understand that by signing it, we are
waiving all rights to a trial or hearing before a court or jury or government
agency of any and all disputes and claims regarding Employee's employment with
the Company or the recruitment to or termination thereof (except as otherwise
stated herein).


              [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE>


CONSIDERATION
- -------------
The parties' mutual agreement to arbitrate the claims identified herein, and the
Company's agreement to pay most of the costs associated with the arbitration,
provide good and sufficient consideration for the mutual promises to arbitrate.

Date:  9/2/2003                         /s/ KALANI JONES
       ------------------------         ---------------------------------------
                                        Kalani Jones


                                        AMERICAN TECHNOLOGY CORPORATION

Date: 9/2/2003                          /s/ RENEE WARDEN
      -------------------------         ---------------------------------------
                                        By: Renee Warden
                                        Chief Accounting Officer, Secretary and
                                        Director of Human Resources

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.30
<SEQUENCE>7
<FILENAME>atc_10kex10-29.txt
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.30

[AMERICAN TECHNOLOGY CORPORATION LOGO]


July 30, 2003, as amended

Carl Gruenler
12377 Creekview Drive
Poway, CA 92064

Dear Carl:

American Technology Corporation ("ATC") is pleased to present you with this
employment offer under the following terms and conditions:

Title:                     Vice President of Military Operations

Start Date:                July 1, 2003

Annual Base Salary:        $110,000.00

Bonus:                     10% annual performance based bonus:

Stock Options:             You will receive 20,000 stock options after the
                           completion of your 90 day probationary period. The
                           options will vest quarterly over a 2-year period. The
                           exercise price will be the fair market value on your
                           first day of employment.

Travel & Entertainment:    A budget will be established for T&E per Company
                           forecasts.

Relocation Package:        The Company will provide you with a relocation
                           package with a maximum budget of $27,500.00.
                           Allowable expenditures are as follows: expenses
                           incurred for the relocation to San Diego,
                           transportation and moving storage fees, packing, real
                           estate commission and other related closing costs
                           associated with the sale of your existing residence,
                           temporary living expenses and travel between the
                           locations outside of business.

Benefits:                  Medical and dental insurance, ATC will provide
                           coverage in terms stated in our Policy Manual.
                           Premiums for both medical and dental insurance for
                           employee and dependents are covered at 100% for HMO
                           levels. If available, the employee can elect to
                           upgrade the coverage at the cost to the employee.
                           Benefits commence on first day of the month of
                           employment. Life insurance coverage is part of the
                           Dental plan and is covered by ATC.

                           ATC observes 9 paid holidays per calendar year. Our
                           Personal Days Off ("PDO") policy is a combination of
                           vacation and sick days. PDO hours are accrued per pay
                           period. Your schedule is as follows:

                           Year one - 3 weeks or 4.62 hours per pay period;
                           Year five - 4 weeks or 6.15 hours per pay period.

                           Vacation Accruals (PDO) will max out at 200 hours.

<PAGE>


                           August 25 through August 31, 2003 (1 week)
                           pre-approved vacation time allotted from year 1
                           vacation accruals.

                           A 401k package is available with multiple investment
                           options and a company match of 25% of Employees
                           deferral up to 6%.

Position Description:      The military operations division will be responsible
                           for ATC product sales and services to military,
                           government, force protection and physical security
                           markets. Principle responsibilities will be managing
                           the profit center, developing the market and
                           generating sales for the division; leading and
                           developing staff; managing the General Dynamics and
                           other strategic relationships; and interfacing with
                           ATC departments for product spiral development, new
                           product development, manufacturing strategies, and
                           corporate strategy.

Policy Manual:             Additional terms of your employment may be set forth
                           in ATC's Policy Manual, as revised from time to time.
                           The new policy manual will be distributed on or about
                           June 23, 2003. Enclosed is a copy of our current
                           version.

Arbitration:               You will be required to sign the attached Mutual
                           Agreement to Arbitrate ("Arbitration Agreement").
                           (see exhibit)

You are entitled to all the published benefits of the company including, but not
limited to those listed above. You are subject to a review after your completion
of the 90-day probationary period to determine satisfaction of fulfilling job
responsibilities as directed by James Irish, CEO. After successful completion of
the probationary period and review you are eligible for time off accrued during
the probationary period.

Please sign this offer in the space provided below signifying that you have read
and accept the terms herein. Let me say that everyone at ATC is looking forward
to having a person of your caliber join the team and hope you feel welcome.

Sincerely,                                                    /s/ CARL GRUENLER
                                                              -----------------
                                                              Carl Gruenler
/s/ RENEE WARDEN
Renee Warden
Director of Human Resources





CEO Reviewed:
              ---------

<PAGE>


                          MUTUAL AGREEMENT TO ARBITRATE

         This Mutual Arbitration Agreement ("Agreement") is entered into between
American Technology Corporation ("the Company") and the employee named below
("Employee").

AGREEMENT TO ARBITRATE CERTAIN DISPUTES AND CLAIMS
- --------------------------------------------------

         Except as specified below, we agree to arbitrate before a single
neutral arbitrator any and all disputes or claims arising from or relating to
Employee's recruitment to or employment with the Company, or the termination of
that employment, including claims against any current or former agent or
employee of the Company, whether the disputes or claims arise in tort, contract,
or pursuant to a statute, regulation, or ordinance now in existence or which may
in the future be enacted or recognized, including, but not limited to, the
following claims:
o        claims for fraud, promissory estoppel, fraudulent inducement of
         contract or breach of contract or contractual obligation, whether such
         alleged contract or obligation be oral, written, or express or implied
         by fact or law;

o        claims for wrongful termination of employment, violation of public
         policy and constructive discharge, infliction of emotional distress,
         misrepresentation, interference with contract or prospective economic
         advantage, defamation, unfair business practices, injury suffered as a
         result of Employee's performance or non-performance of his or her
         duties, and any other tort or tort-like causes of action relating to or
         arising from the employment relationship or the formation or
         termination thereof;

o        claims of discrimination, harassment, or retaliation under any and all
         federal, state and/or municipal statutes, regulations, or ordinances
         that prohibit discrimination, harassment, or retaliation in employment,
         as well as claims for violation of any other federal, state, or
         municipal statute, regulation, or ordinance, except as set forth
         herein; and

o        claims for non-payment or incorrect payment of wages, commissions,
         bonuses, severance, employee fringe benefits, stock options and the
         like, whether such claims be pursuant to alleged express or implied
         contract or obligation, equity, the California Labor Code, the Fair
         Labor Standards Act, the Employee Retirement Income Securities Act, and
         any other federal, state, or municipal laws concerning wages,
         compensation or employee benefits.

o        claims for infliction of emotional distress, misrepresentation,
         interference with contract or prospective economic advantage, violation
         of public policy, defamation, unfair business practices, invasion of
         privacy, and any other tort or tort-like causes of action relating to
         or arising from the employment relationship or the formation or
         termination thereof.

o        claims arising out of or relating to the grant, exercise, vesting
         and/or issuance of equity in the Company or options to purchase equity
         in the Company.

We understand and agree that arbitration of the disputes and claims covered by
this Agreement shall be the sole and exclusive mechanism for resolving any and
all existing and future disputes or claims arising out of Employee's recruitment
to or employment with the Company or the termination thereof, except as
specified below.

CLAIMS NOT SUBJECT TO ARBITRATION
- ---------------------------------

We further understand and agree that the following disputes and claims are not
covered by this Agreement and shall therefore be resolved as required by the law
then in effect:
o        Employee's claims for workers' compensation benefits, unemployment
         insurance, or state or federal disability insurance.

<PAGE>


o        Either party's claims concerning the validity, infringement,
         enforceability, disclosure or misappropriation of any trade secret,
         patent right, copyright, trademark, or any other intellectual or
         confidential property held or sought by Employee or the Company.

o        Either party's request for temporary injunctive relief prior to
         resolution of the dispute on its merits in an arbitration proceeding.

o        Any other dispute or claim that has been expressly excluded from
         arbitration by statute or binding legal precedent.

o        Any claims which, as a matter of law then in effect, cannot be the
         subject of a mandatory arbitration agreement.

Nothing in this Agreement should be interpreted as restricting or prohibiting
the Employee from filing a charge or complaint with a federal, state, or local
administrative agency charged with investigating and/or prosecuting complaints
under any applicable federal, state or municipal law or regulation. Any dispute
or claim that is not resolved through the federal, state, or local agency must
be submitted to arbitration in accordance with this Agreement.

FINAL AND BINDING ARBITRATION; WAIVER OF TRIAL BEFORE COURT, JURY OR GOVERNMENT
- -------------------------------------------------------------------------------
AGENCY
- ------

We understand and agree that the arbitration of disputes and claims under this
Agreement shall be instead of a trial before a court or jury or a hearing before
a government agency. We understand and agree that, by signing this Agreement, we
are expressly waiving any and all rights to a trial before a court or jury or
before a government agency regarding any disputes and claims which we now have
or which we may in the future have that are subject to arbitration under this
Agreement, except as provided in the preceding section.

ARBITRATION PROCEDURES
- ----------------------
Any arbitration held under this Agreement shall be conducted before a single
neutral arbitrator and shall be administered by JAMS, unless the parties
otherwise stipulated. The party initiating arbitration must provide written
notice of the request to arbitrate to the other party and to JAMS within the
applicable statute(s) of limitations. Written notice to the Company is to be
directed to the Company's Human Resources Department. The arbitration shall be
conducted in accordance with the JAMS Employment Arbitration Rules and
Procedures (the "JAMS Rules") in effect at the time of the arbitration;
provided, however, that the arbitrator shall allow the discovery authorized by
California Code of Civil Procedure section 1283.05 or any other discovery
required by California law. The parties shall attempt to jointly select the
single neutral arbitrator. If they are unable to reach agreement, the procedures
contained in the JAMS Rules shall apply, or JAMS shall appoint the single
arbitrator. To the extent that any of the JAMS Rules or anything in this
Agreement conflicts with any arbitration procedures required by California law,
the arbitration procedures required by California law shall govern.

PLACE OF ARBITRATION
- --------------------
The arbitration shall take place in San Diego County, California, or, at the
Employee's option, in the county in which the Employee works, or last worked,
for the Company. The parties may agree to hold the arbitration at any other
place mutually agreeable to both of them.

DISCOVERY
- ---------
The arbitrator shall allow the discovery authorized by California Code of Civil
Procedure section 1283.05 or any other discovery required by California law.

WRITTEN ARBITRATION AWARD
- -------------------------
The Arbitrator shall issue a written Award that sets forth the essential
findings and conclusions on which the Award is based. The Arbitrator shall have
the authority to award any relief authorized by law in connection with the
asserted claims or disputes. The Arbitrator's Award shall be final and binding

<PAGE>


on both the Company and Employee and it shall provide the exclusive remedy(ies)
for resolving any and all disputes and claims subject to arbitration under this
Agreement. The Arbitrator's Award shall be subject to correction, confirmation,
or vacation, as provided by California Code of Civil Procedure Section 1285.8 ET
SEQ and any applicable California case law setting forth the standard of
judicial review of arbitration Awards.

GOVERNING LAW
- -------------
We understand and agree that this Agreement and its validity, construction and
performance shall be governed by the laws of the State of California, without
reference to rules relating to conflicts of law. We further understand and agree
that any dispute(s) and claim(s) to be arbitrated under this Agreement shall be
governed by the laws of the State of California, without reference to rules
relating to conflicts of law.

COSTS OF ARBITRATION
- --------------------
We agree that the Company will bear the arbitrator's fee and any other type of
expense or cost that the employee would not be required to bear if he or she
were free to bring the dispute(s) or claim(s) in court as well as any other
expense or cost that is unique to arbitration. If the Employee is the party
initiating arbitration, he or she will be required to contribute to the
administrative costs of the arbitration the same amount which he or she would
have paid as a filing fee in order to commence the action in a civil court of
law. The Company and Employee shall each bear their own attorneys' fees incurred
in connection with the arbitration, and the arbitrator will not have authority
to award attorneys' fees unless a statute or contract at issue in the dispute
specifically authorizes the award of attorneys' fees to the prevailing party, in
which case the arbitrator shall have the authority to make an award of
attorneys' fees as required or permitted by applicable law. If there is a
dispute as to whether the Company or Employee is the prevailing party in the
arbitration, the Arbitrator will decide this issue.

SEVERABILITY
- ------------
We understand and agree that if any term or portion of this Agreement shall, for
any reason, be held to be invalid or unenforceable or to be contrary to public
policy or any law, then the remainder of this Agreement shall not be affected by
such invalidity or unenforceability but shall remain in full force and effect,
as if the invalid or unenforceable term or portion thereof had not existed
within this Agreement.

COMPLETE AGREEMENT
- ------------------
We understand and agree that this Agreement contains the complete agreement
between the Company and Employee regarding the subjects covered in it; that it
supersedes any and all prior representations and agreements between us, if any;
and that it may be modified only in a writing, expressly referencing this
Agreement and Employee by full name, and signed by the Chief Executive Officer
of the Company. Any such written modification must also state the intention of
the parties to modify this Arbitration Agreement.

KNOWING AND VOLUNTARY AGREEMENT
- -------------------------------
We have been advised to consult with attorneys of our own choosing before
signing this Agreement, and we have had an opportunity to do so. We agree that
we have read this Agreement carefully and understand that by signing it, we are
waiving all rights to a trial or hearing before a court or jury or government
agency of any and all disputes and claims regarding Employee's employment with
the Company or the recruitment to or termination thereof (except as otherwise
stated herein).

              [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE>


CONSIDERATION
- -------------
The parties' mutual agreement to arbitrate the claims identified herein, and the
Company's agreement to pay most of the costs associated with the arbitration,
provide good and sufficient consideration for the mutual promises to arbitrate.

Date:  6/17/2003                        /s/ CARL GRUENLER
       ------------------------         ---------------------------------------
                                        Carl Gruenler


                                        AMERICAN TECHNOLOGY CORPORATION

Date:  6/17/2003                        /s/ RENEE WARDEN
       ------------------------         ---------------------------------------
                                        By: Renee Warden
                                        Chief Accounting Officer, Secretary and
                                        Director of Human Resources

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>8
<FILENAME>atco_10kex23-1.htm
<TEXT>
<html>

<head>
<title>Exhibit 23</title>
</head>

<body>

<p style=" margin-bottom:0pt;text-align:right; margin-top:8pt;"><font size="2">
Exhibit 23.1</font></p>
<p style=" margin-bottom:0pt;text-align:center; margin-top:16pt;">
<font SIZE="2">CONSENT OF INDEPENDENT</font><br>
<font SIZE="2">CERTIFIED PUBLIC ACCOUNTANTS</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">American
Technology Corporation</font><br>
<font size="2">San Diego, California</font></p>
<p style=" margin-bottom:0pt; margin-top:8pt;"><font size="2">We hereby consent
to the incorporation by reference in the Registration Statements on Forms S-8
(File No. 333-09265, File No. 333-09269, File No. 333-23845, File No. 333-59929,
File No 333-54034 and File No. 333-101279) and Forms S-3 (File No. 333-27455,
File No. 333-36003, File No. 333-71351, File No. 333-99675, File No. 333-36000,
File No. 333-105740 and File No. 333-107635) of our report dated December 5,
2003 relating to the financial statements of American Technology Corporation
appearing in the Company&#146;s Annual Report on Form 10-K for the year ended
September 30, 2003.</font></p>
<p style=" margin-bottom:0pt; margin-top:0pt;"><font size="2">&nbsp;</font></p>
<p>&nbsp;</p>
<p>
    <font size="2">/s/ BDO SEIDMAN, LLP</font><br>
</p>
<p><font size="2">Costa Mesa, CA</font><br>
<font size="2">December 26, 2003</font></p>
<p><br>
</p>
<table width="100%" cellspacing="0" cellpadding="0">
  <tr>
    <td align="left" width="50%"></td>
    <td align="left" width="50%"></td>
  </tr>
</table>
<page />
<p>&nbsp;</p>

</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>9
<FILENAME>atco_10kex31-1.htm
<TEXT>
<html>

<head>
<title>Exhibit 31</title>
</head>

<body>

<p style='page-break-before:always'><PAGE>
</page>
<p style=' margin-bottom:0pt;text-align:right; margin-top:8pt;'><b><font size=2>Exhibit 31.1</font></b></p>
<p style=' margin-bottom:0pt;text-align:center; margin-top:16pt;'><b><font SIZE=2>CERTIFICATIONS</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>I, Elwood G. Norris, certify that: </font></p>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width="0%" ></td><td width="4%" nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>1.</font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>I have reviewed this annual report on Form 10-K of American Technology Corporation; </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width="0%" ></td><td width="4%" nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>2.</font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width="0%" ></td><td width="4%" nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>3.</font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width="0%" ></td><td width="4%" nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>4.</font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>The registrant&#146;s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width="4%" ></td><td width="4%" nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>a)</font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width="4%" ></td><td width="4%" nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>b)</font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>[paragraph omitted pursuant to SEC Release Nos. 33-2838 and 34-47986]</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width="4%" ></td><td width="4%" nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>c)</font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>evaluated the effectiveness of the registrant&#146;s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width="4%" ></td><td width="4%" nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>d)</font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>disclosed in this annual report any change in the registrant&#146;s internal control over financial reporting that occurred during the registrant&#146;s most recent fiscal quarter, which is the registrant&#146;s forth fiscal quarter, that has materially affected, or is reasonably likely to materially affect, the registrant&#146;s internal control over financial reporting.</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width="0%" ></td><td width="4%" nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>5.</font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>The registrant&#146;s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant&#146;s auditors and the audit committee of registrant&#146;s board of directors (or persons performing the equivalent functions): </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width="4%" ></td><td width="4%" nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>a)</font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant&#146;s ability to record, process, summarize and report financial information; and </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width="4%" ></td><td width="4%" nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>b)</font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant&#146;s internal controls over financial reporting. </font></td></tr></table>
<p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; '> <tr >
<td colspan="2" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>Dated: December
29, 2003</font></p> </td>
<td width="13" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="31" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="275" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="31" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><font size=2>&nbsp;</font></p> </td>
<td width="275" valign=bottom style='border-bottom: solid .5pt gray'> <p style='margin-bottom:0pt;margin-top:0in;'><br> <font size=2>/s/ ELWOOD G. NORRIS</font></p> </td>
<td width="13" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="31" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><font size=2>&nbsp;</font></p> </td>
<td width="275" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><br > <br > </p> </td> </tr> <tr >
<td width="31" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="275" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>Elwood G. Norris, </font><br> <font size=2>Chairman of the Board</font><br> <font size=2>(Principal Executive Officer)</font></p> </td>
<td width="13" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="31" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="275" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td> </tr> </table>
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<TYPE>EX-31.2
<SEQUENCE>10
<FILENAME>atco_10kex31-2.htm
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<title>Exhibit 31</title>
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<p style='page-break-before:always'><PAGE>
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<p style=' margin-bottom:0pt;text-align:right; margin-top:8pt;'><b><font size=2>Exhibit 31.2</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>I, Carl Gruenler, certify that: </font></p>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width="0%" ></td><td width="4%" nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>1.</font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>I have reviewed this annual report on Form 10-K of American Technology Corporation; </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width="0%" ></td><td width="4%" nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>2.</font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width="0%" ></td><td width="4%" nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>3.</font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; </font></td></tr></table>

<table width="100%" cellspacing=0 cellpadding=0><tr><td width="0%" ></td><td width="4%" nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>4.</font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>The registrant&#146;s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width="4%" ></td><td width="4%" nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>a)</font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width="4%" ></td><td width="4%" nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>b)</font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>[paragraph omitted pursuant to SEC Release Nos. 33-2838 and 34-47986]</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width="4%" ></td><td width="4%" nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>c)</font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>evaluated the effectiveness of the registrant&#146;s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width="4%" ></td><td width="4%" nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>d)</font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>disclosed in this annual report any change in the registrant&#146;s internal control over financial reporting that occurred during the registrant&#146;s most recent fiscal quarter, which is the registrant&#146;s forth fiscal quarter,  that has materially affected, or is reasonably likely to materially affect, the registrant&#146;s internal control over financial reporting.</font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width="0%" ></td><td width="4%" nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>5.</font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>The registrant&#146;s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant&#146;s auditors and the audit committee of registrant&#146;s board of directors (or persons performing the equivalent functions): </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width="4%" ></td><td width="4%" nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>a)</font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant&#146;s ability to record, process, summarize and report financial information; and </font></td></tr></table>
<table width="100%" cellspacing=0 cellpadding=0><tr><td width="4%" ></td><td width="4%" nowrap valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>b)</font></td><td valign="top"><p style=' margin-bottom:0pt; margin-top:6pt;'><font size=2>any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant&#146;s internal controls over financial reporting.</font></td></tr></table>
<p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; '> <tr >
<td colspan="2" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>Dated: December
29, 2003</font></p> </td>
<td width="13" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="31" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="275" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td width="31" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><font size=2>&nbsp;</font></p> </td>
<td width="275" valign=bottom style='border-bottom: solid .5pt gray'> <p style='margin-bottom:0pt;margin-top:0in;'><br> <font size=2>/s/ CARL GRUENLER</font></p> </td>
<td width="13" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="31" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><font size=2>&nbsp;</font></p> </td>
<td width="275" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><br > <br > </p> </td> </tr> <tr >
<td width="31" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="275" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>Carl Gruenler </font><br> <font size=2>Vice President, Military Operations and </font><br> <font size=2>Interim Chief Financial Officer</font><br> <font size=2>(Principal Financial Officer)</font></p> </td>
<td width="13" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="31" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="275" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td> </tr> </table>

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<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>11
<FILENAME>atco_10kex32-1.htm
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<title>Exhibit 32</title>
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<p>&nbsp;</p>

<p style=' margin-bottom:0pt;text-align:right; margin-top:8pt;'><b><font size=2>Exhibit 32.1</font></b></p>
<p style=' margin-bottom:0pt;text-align:center; margin-top:16pt;'><b><font SIZE=2>CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER</font></b><br><b><font SIZE=2>PURSUANT TO</font></b><br><b><font size=2>18 U.S.C. SECTION 1350,</font></b><br><b><font SIZE=2>AS ADOPTED PURSUANT TO</font></b><br><b><font SIZE=2>SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</font></b></p>
<p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Each of the undersigned hereby certifies, in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his or her capacity as an officer of American Technology Corporation (the &#147;Company&#148;), that, to his or knowledge, the Annual Report of the Company on Form 10-K for the fiscal ended September 30, 2003 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operation of the Company as of the dates and for the periods presented in the financial statements included in such report.</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table border="0" cellspacing=0 cellpadding=0 style='margin-left:.4pt;border-collapse: collapse'> <tr >
<td colspan="2" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>Dated: December
29, 2003</font></p> </td>
<td width="13" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="31" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="275" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td colspan="2" valign=bottom style=' border-bottom: solid .5pt gray'> <p style='margin-bottom:0pt;margin-top:0in;'><br> <font size=2>/s/ ELWOOD G. NORRIS</font></p> </td>
<td width="13" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="31" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><font size=2>&nbsp;</font></p> </td>
<td width="275" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><br > <br > </p> </td> </tr> <tr >
<td width="42" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="264" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>Elwood G. Norris, </font><br> <font size=2>Chairman of the Board.</font><br> <font size=2>(Principal Executive Officer)</font></p> </td>
<td width="13" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="31" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="275" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td> </tr>  <tr >
<td width="39" ></td>
<td width="243" ></td>
<td width="12" ></td>
<td width="29" ></td>
<td width="254" ></td> </tr>  </table>
<p>
<br>
</p>
<p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table border="0" cellspacing=0 cellpadding=0 style='margin-left:.4pt;border-collapse: collapse'> <tr >
<td colspan="2" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>Dated: December
29, 2003</font></p> </td>
<td width="13" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="31" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="275" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td> </tr> <tr >
<td colspan="2" valign=bottom style=' border-bottom: solid .5pt gray'> <p style='margin-bottom:0pt;margin-top:0in;'><br> <font size=2>/s/ CARL GRUENLER</font></p> </td>
<td width="13" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="31" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><font size=2>&nbsp;</font></p> </td>
<td width="275" valign=bottom > <p style='margin-bottom:0pt;margin-top:1.0pt;'><br > <br > </p> </td> </tr> <tr >
<td width="42" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="264" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>Carl Gruenler </font><br> <font size=2>Vice President, Military Operations and. </font><br> <font size=2>Interim Chief Financial Officer</font><br> <font size=2>(Principal Financial Officer)</font></p> </td>
<td width="13" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="31" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="275" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td> </tr>  <tr >
<td width="39" ></td>
<td width="243" ></td>
<td width="12" ></td>
<td width="29" ></td>
<td width="254" ></td> </tr>  </table>

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