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Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
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<SEC-DOCUMENT>0001019687-04-002933.txt : 20041228
<SEC-HEADER>0001019687-04-002933.hdr.sgml : 20041228
<ACCEPTANCE-DATETIME>20041228164524
ACCESSION NUMBER:		0001019687-04-002933
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		18
CONFORMED PERIOD OF REPORT:	20040930
FILED AS OF DATE:		20041228
DATE AS OF CHANGE:		20041228

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:		041228911

	BUSINESS ADDRESS:	
		STREET 1:		13114 EVENING CREEK DRIVE SOUTH
		CITY:			SAN DIEGO
		STATE:			CA
		ZIP:			92128
		BUSINESS PHONE:		6196792114

	MAIL ADDRESS:	
		STREET 1:		13114 EVENING CREEK DRIVE SOUTH
		CITY:			SAN DIEGO
		STATE:			CA
		ZIP:			92128
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>atc_10k-093004.htm
<TEXT>

<html>
<head>
<title>UNITED STATES </title>
</head><body>



<p style='margin:0pt;margin-top:0in;margin-left:0in;text-align:center;font-size:11.0pt;font-family:"Times New Roman";color:black;font-weight:bold;margin-right:.9pt'>UNITED STATES<br>
<b
><Font style='font-size:11.0pt;mso-bidi-font-size:
10.0pt;font-family:"Times New Roman"'>SECURITIES AND EXCHANGE COMMISSION<br>
WASHINGTON, D.C. 20549</Font></b></p>

<p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;margin-right:.9pt;text-align:center;
line-height:normal;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:11.0pt;font-family:"Times New Roman"'>___________________</Font></p>

<p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;margin-right:.9pt;text-align:center;
line-height:normal;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:11.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;margin-right:.9pt;text-align:center;
line-height:normal;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-size:18.0pt;mso-bidi-font-size: 10.0pt;font-family:"Times New Roman"'>FORM 10-K</Font></b></p>
<p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;margin-right:-22.3pt;text-align:center; line-height:normal;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b><Font style='font-size:10.0pt;font-family: "Times New Roman"'>&nbsp;</Font></b></p>
<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;margin-left:.25in;text-indent:-.25in;line-height: normal;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b><Font style='font-size:10.0pt;font-family: "Times New Roman"'>[X]&nbsp;&nbsp;ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2004; OR</Font></b></p>

<p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal;
tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-size:10.0pt;font-family:
"Times New Roman"'>&nbsp;</Font></b></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;margin-left:.25in;text-indent:-.25in;line-height: normal;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b ><Font style='font-size:10.0pt;font-family: "Times New Roman"'>[&nbsp;&nbsp;]&nbsp;&nbsp;TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______________ TO __________________</Font></b></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal;
tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-size:10.0pt;font-family:
"Times New Roman"'>Commission File Number 0-24248</Font></b></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;text-align:center;font-size:12.0pt;font-family:"Times New Roman";color:black;font-weight:bold;'><Font style='font-size:14.0pt;mso-bidi-font-size:10.0pt'>AMERICAN
TECHNOLOGY CORPORATION</Font></p>

<p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal;
tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>(Exact name of
registrant as specified in its charter)</Font></p>

<p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal;
tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<table border=0 cellspacing=0 cellpadding=0 style='border-collapse:collapse;
 mso-padding-alt:0in 5.4pt 0in 5.4pt' width="673">
 <tr>
  <td valign=top style='width:73;'>
  &nbsp;</td>
  <td valign=top style='width:830;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal;
  tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
  ><Font style='font-size:10.0pt;font-family:
  "Times New Roman"'>DELAWARE</Font></b></p>
  </td>
  <td valign=top style='width:154;'>
  &nbsp;</td>
  <td valign=top style='width:428;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal;
  tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
  ><Font style='font-size:10.0pt;font-family:
  "Times New Roman"'>87-0361799</Font></b></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:73;'>
  &nbsp;</td>
  <td valign=top style='width:830;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal;
  tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>(State or other
  jurisdiction of</Font></p>
  </td>
  <td valign=top style='width:154;'>
  &nbsp;</td>
  <td valign=top style='width:428;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal;
  tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>(I.R.S. Employer</Font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:73;'>
  &nbsp;</td>
  <td valign=top style='width:830;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal;
  tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Incorporation or
  organization)</Font></p>
  </td>
  <td valign=top style='width:154;'>
  &nbsp;</td>
  <td valign=top style='width:428;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal;
  tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Identification No.)</Font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:73;'>
  &nbsp;</td>
  <td valign=top style='width:830;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal;
  tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>
  </td>
  <td valign=top style='width:154;'>
  &nbsp;</td>
  <td valign=top style='width:428;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal;
  tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:73;'>
  &nbsp;</td>
  <td valign=top style='width:830;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal;
  tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
  ><Font style='font-size:10.0pt;font-family:
  "Times New Roman"'>13114 Evening Creek Drive South, San Diego, California</Font></b></p>
  </td>
  <td valign=top style='width:154;'>
  &nbsp;</td>
  <td valign=top style='width:428;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal;
  tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
  ><Font style='font-size:10.0pt;font-family:
  "Times New Roman"'>92128</Font></b></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:73;'>
  &nbsp;</td>
  <td valign=top style='width:830;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal;
  tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>(Address of principal
  executive offices)</Font></p>
  </td>
  <td valign=top style='width:154;'>
  &nbsp;</td>
  <td valign=top style='width:428;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal;
  tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>(Zip Code)</Font></p>
  </td>
 </tr>
</table>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal;
tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Registrant's' telephone
number, including area code:&nbsp;&nbsp;(858)
679-2114</Font></p>

<p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal;
tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-size:10.0pt;font-family:
"Times New Roman"'>&nbsp;</Font></b></p>

<p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal;
tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-size:10.0pt;font-family:
"Times New Roman"'>SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:</Font></b></p>

<p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal;
tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>None</Font></p>

<p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal;
tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal;
tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-size:10.0pt;font-family:
"Times New Roman"'>SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:</Font></b></p>

<p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal;
tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal;
  tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in;
  mso-element:frame;mso-element-frame-hspace:9.0pt;mso-element-wrap:around;
  mso-element-anchor-vertical:paragraph;mso-element-anchor-horizontal:margin;
  mso-element-top:-2.5pt;mso-height-rule:exactly'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>Common Stock, $.00001 par value per share</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:"Times New Roman";color:black;line-height:normal;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:"Times New Roman";color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt'>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 [X] No [&nbsp;&nbsp;]</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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'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.
[&nbsp;&nbsp;]&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Indicate by check mark
whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the
Act) Yes [X] NO [&nbsp; ]</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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, 2004) was $94,391,214.*</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
The number of shares of Common Stock, $.00001 par value, outstanding on December
20, 2004, was 19,808,819.</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>

<p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;page-break-after:avoid'>&nbsp;</p>

<p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;page-break-after:avoid'><b
><Font style='font-size:10.0pt;font-family:
"Times New Roman"'>DOCUMENTS INCORPORATED BY REFERENCE</Font></b></p>

<p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;page-break-after:avoid'><b
><Font style='font-size:10.0pt;font-family:
"Times New Roman"'>&nbsp;</Font></b></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:
..5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Portions of the
registrant's Definitive Proxy Statement to be filed with the Commission
pursuant to Regulation 14A in connection with the registrant's 2005 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 registrant's fiscal year ended
September 30, 2004.</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;tab-stops:
..5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;page-break-after:avoid'><Font style='font-size:10.0pt;
font-family:"Times New Roman"'>*&nbsp;Excludes the Common Stock held by executive officers, directors and
stockholders whose ownership exceeds 5% of the Common Stock outstanding at
March 31, 2004. This calculation does not reflect a determination that such
persons are affiliates for any other purpose.</Font></p>



&nbsp;<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>



<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt'>&nbsp;</Font></p>

<table border=0 cellspacing=0 cellpadding=0 style='border-collapse:collapse;
 mso-padding-alt:0in 5.4pt 0in 5.4pt' width="682">
 <tr>
  <td valign=top style='width:76;' align="center">
  &nbsp;</td>
  <td valign=top style='width:530;' align="center">



<p style='margin:0pt;margin:0in;text-align:center;font-size:12.0pt;font-family:"Times New Roman";color:black;font-weight:bold;'>
TABLE OF CONTENTS</p>

  </td>
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  &nbsp;</td>
 </tr>
 <tr>
  <td valign=top style='width:76;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:530;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'><u><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Page</Font></u></p>
  </td>
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 <tr>
  <td valign=top style='width:682;' colspan="3">
  <p align=center style='font-size:12.0pt;font-family:Times;color:black;margin-top:0;margin-bottom:0in;margin-bottom:0;text-align:center;
  line-height:normal'><b><Font style='font-size:10.0pt;font-family:"Times New Roman"'>PART I</Font></b></p>
  </td>
 </tr>
 <tr>
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  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'><a href="#Item 1. Business">ITEM 1.</a></Font></p>
  </td>
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  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'><a href="#Item 1. Business">Business</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>1</Font></p>
  </td>
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  <td valign=top style='width:76;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#Overview">Overview</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:10pt;font-family:Times;color:black;text-align:center;line-height:normal'>
  2</p>
  </td>
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 <tr>
  <td valign=top style='width:76;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#Recent Developments">Recent
  Developments</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:10pt;font-family:Times;color:black;text-align:center;line-height:normal'>
 2</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:76;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#Segment Reporting">Segment Reporting</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:10pt;font-family:Times;color:black;text-align:center;line-height:normal'>
  2</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:76;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  <a href="#Our Technology and Products">Our
  Technology and Products</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>3</Font></p>
  </td>
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  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#Operating Segment Information">Operating Segment Information</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:10pt;font-family:Times;color:black;text-align:center;line-height:normal'>
  5</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:76;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#Business Group">Business Group</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:10pt;font-family:Times;color:black;text-align:center;line-height:normal'>
  5</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:76;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#Government Group">Government Group</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:10pt;font-family:Times;color:black;text-align:center;line-height:normal'>
  6</p>
  </td>
 </tr>
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  <td valign=top style='width:76;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#Manufacturing and Suppliers">Manufacturing and Suppliers</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>8</Font></p>
  </td>
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  <td valign=top style='width:76;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#Selling, Marketing and Customers">Selling, Marketing and Customers</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>9</Font></p>
  </td>
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  <td valign=top style='width:76;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#Warranties">Warranties</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>9</Font></p>
  </td>
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  <td valign=top style='width:76;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#Competition">Competition</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:10pt;font-family:Times;color:black;text-align:center;line-height:normal'>
  9</p>
  </td>
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  <td valign=top style='width:76;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#Seasonality">Seasonality</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  10</Font></p>
  </td>
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 <tr>
  <td valign=top style='width:76;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#Government Regulation and Environmental Matters">Government Regulation and Environmental Matters</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  10</Font></p>
  </td>
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  <td valign=top style='width:76;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#Intellectual Property Rights and Proprietary Information">Intellectual Property Rights and Proprietary Information</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  11</Font></p>
  </td>
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  <td valign=top style='width:76;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#Research and Development">Research and Development</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  13</Font></p>
  </td>
 </tr>
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  <td valign=top style='width:76;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#Executive Officers">Executive Officers</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  13</Font></p>
  </td>
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  <td valign=top style='width:76;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#Employees">Employees</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>14</Font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:76;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'><a href="#item 2">ITEM 2.</a></Font></p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'><a href="#item 2">Properties</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  14</Font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:76;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'><a href="#Item 3. Legal Proceedings">ITEM 3.</a></Font></p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'><a href="#Item 3. Legal Proceedings">Legal
  Proceedings</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  15</Font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:76;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>
  <a href="#Item 4. Submission of Matters to a Vote of Security Holders.">ITEM 4.</a></Font></p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>
  <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 valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  15</Font></p>
  </td>
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  <td valign=top style='width:76;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:682;' colspan="3">
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'>&nbsp;<b><Font style='font-size:10.0pt;font-family:"Times New Roman"'>PART II</Font></b></p>
  </td>
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 <tr>
  <td valign=top style='width:76;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>
  <a href="#Item 5. Market for Registrant&#146;s Common Equity, Related Shareholder Matters and Issuers Purchases of Equity Securities.">ITEM 5.</a></Font></p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>
  <a href="#Item 5. Market for Registrant&#146;s Common Equity, Related Shareholder Matters and Issuers Purchases of Equity Securities.">Market for Registrant&#146;s Common Equity, Related</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:76;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#Item 5. Market for Registrant&#146;s Common Equity, Related Shareholder Matters and Issuers Purchases of Equity Securities.">Stockholder Matters and Issuers Purchases of Equity Securities</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  15</Font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:76;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'><a href="#Item 6. Selected Financial Data.">ITEM 6.
  </a> </Font></p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'><a href="#Item 6. Selected Financial Data.">Selected Financial Data</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  17</Font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:76;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>
  <a href="#Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.">ITEM 7.</a></Font></p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>
  <a href="#Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.">Management's Discussion and Analysis of
  Financial Condition</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:76;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>&nbsp;&nbsp;&nbsp;<a href="#Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.">and
  Results of Operations</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  17</Font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:76;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>
  <a href="#item 7a">ITEM 7A.</a></Font></p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>
  <a href="#item 7a">Quantitative and Qualitative Disclosures About
  Market Risk</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  36</Font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:76;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>
  <a href="#item 8">ITEM 8.</a></Font></p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>
  <a href="#item 8">Financial Statements and Supplementary Data</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  36</Font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:76;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>
  <a href="#item 9">ITEM 9. </a> </Font></p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>
  <a href="#item 9">Changes in and Disagreements with Accountants
  on </a> </Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:76;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#item 9">Accounting and Financial Disclosure</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  36</Font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:76;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'><a href="#item 9a">ITEM 9A.</a></Font></p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'><a href="#item 9a">Controls and Procedures</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  36</Font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:76;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>
  <a href="#item 8">ITEM 9B.</a></Font></p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>
  <a href="#item 8">Other Information</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-family:Times;color:black;text-align:center;line-height:normal'>
  <font size="2">36</font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:76;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:682;' colspan="3">
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'>&nbsp;<b><Font style='font-size:10.0pt;font-family:"Times New Roman"'>PART III</Font></b></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:76;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>
  <a href="#item 10">ITEM 10.</a></Font></p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>
  <a href="#item 10">Directors and Executive Officers of the
  Registrant</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  37</Font></p>
  </td>
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 <tr>
  <td valign=top style='width:76;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'><a href="#item 11">ITEM 11. </a> </Font></p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'><a href="#item 11">Executive Compensation</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  38</Font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:76;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>
  <a href="#item 12">ITEM 12. </a> </Font></p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>
  <a href="#item 12">Security Ownership of Certain Beneficial
  Owners and Management</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:76;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>&nbsp;&nbsp;&nbsp;<a href="#item 12">and
  Related Stockholder Matters</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  38</Font></p>
  </td>
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 <tr>
  <td valign=top style='width:76;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>
  <a href="#item 13">ITEM 13. </a> </Font></p>
  </td>
  <td valign=top style='width:530;'>
  <p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>
  <a href="#item 13">Certain Relationships and Related Transactions</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  38</Font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:76;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>
  <a href="#item 14">ITEM 14. </a> </Font></p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>
  <a href="#item 14">Principal Accounting Fees and Services</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:10pt;font-family:Times;color:black;text-align:center;line-height:normal'>
  38</p>
 </td>
 </tr>
 <tr>
  <td valign=top style='width:76;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:682;' colspan="3">
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'>&nbsp;<b><Font style='font-size:10.0pt;font-family:"Times New Roman"'>PART IV</Font></b></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:76;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>
  <a href="#item 15">ITEM 15. </a> </Font></p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>
  <a href="#item 15">Exhibits, Financial Statement Schedules and
  Reports on Form 8-K</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:10pt;font-family:Times;color:black;text-align:center;line-height:normal'>
  38</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:76;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:530;'>
  <p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>
  <a href="#Financial Statements and Financial Statement Schedules">Financial Statements and Financial Statement
  Schedules</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;line-height:normal'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>F-1</Font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:76;'>
  &nbsp;</td>
  <td valign=top style='width:530;'>
  <font size="2">
  <a href="#SIGNATURES">Signatures</a></font></td>
  <td valign=top style='width:76;'>
  <p align="center"><font size="2">44</font></td>
 </tr>
 <tr>
  <td valign=top style='width:76;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'>&nbsp;</p>
  </td>
  <td valign=top style='width:530;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'><a href="#Exhibit Index">Exhibit Index</a></Font></p>
  </td>
  <td valign=top style='width:76;'>
  <p align=center style='margin:0in;font-size:10pt;font-family:Times;color:black;text-align:center;line-height:normal'>
  45</p>
  </td>
 </tr>
</table>

<p>&nbsp;</p>



<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>

<h1  style='margin:0in;text-align:center;font-size:14.0pt;font-family:"Times New Roman";color:black;font-weight:bold;line-height:normal'>&nbsp;</h1>

<h1  style='margin:0in;text-align:center;font-size:14.0pt;font-family:"Times New Roman";color:black;font-weight:bold;line-height:normal'>PART I</h1>

<p  style='margin:0in;text-align:center;font-size:14.0pt;font-family:"Times New Roman";color:black;font-weight:bold;line-height:normal'>&nbsp;</p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-family:"Times New Roman"'>Forward
Looking Statements</Font></b></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;font-size:10.0pt;font-family:"Times New Roman"'><i ><Font style='font-size:10.0pt;font-family:"Times New Roman"'>This report contains certain statements of a forward-looking nature relating to future events or the future performance of our company.&nbsp; Words such as</Font></i> &#8220;<i >expects,</i>&#8221; &#8220;<i >anticipates,</i>&#8221; &#8220;<i >intends,</i>&#8221; &#8220;<i >plans,</i>&#8221; &#8220;<i >believes,</i>&#8221; &#8220;<i >seeks,</i>&#8221; &#8220;<i >estimates</i>&#8221;<i > 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.&nbsp; Prospective investors are cautioned that such statements are only predictions and that actual events or results may differ materially.&nbsp; In evaluating such statements, prospective investors should specifically consider various factors identified in this re
port, including the matters set forth below under the caption</i> &#8220;<i >Risk Factors,</i>&#8221;<i > which could cause actual results to differ materially from those indicated by such forward-looking statements.</i></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:"Times New Roman";color:black;line-height:normal'><Font style='font-size:10.0pt'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-family:"Times New Roman"'><a name="Item 1. Business">Item
1. Business</a></Font></b></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-size:10.0pt;font-family:
"Times New Roman"'><a name="Overview">Overview</a></Font></b></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>American
Technology Corporation is an innovator of proprietary sound reproduction
technologies and products. We believe our innovative proprietary sound
technologies provide us a significant competitive advantage in our principal
markets. We believe we are the leader in developing and commercializing
parametric loudspeakers, branded as HyperSonic&reg; sound or HSS&reg;. We believe we
are also the leader in developing and commercializing high intensity directed
acoustical devices, branded as our Long Range Acoustic Device or LRAD&#153;. We have
filed over 70 patent applications in the United States, and over 90 patent
applications internationally covering our various sound technologies and
products. </Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>We
make significant investments in research and development to expand our
technology and product portfolio. We are expanding our LRAD product family,
introducing a new NeoPlanar product line for emergency notification and general
announcing markets which require high intelligibility, and are utilizing our
products to provide solutions for difficult acoustic challenges.&nbsp;&nbsp;We offer our products for sale worldwide,
but expect the largest markets to be the United States, Europe and Asia.</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Our
four major products from our technology portfolio are listed below.</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<ul style='margin-top:0in' >
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;margin-bottom:6.0pt;mso-list:l13 level1 lfo23;
     tab-stops:list .5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Our
     HyperSonic sound, or HSS, technology is a new parametric speaker
     technology that creates sound &#8220;in the air.&#8221; Sound is generated along an
     air column using ultrasonic frequencies, which are 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 our substantial intellectual property portfolio and pioneering HSS
     products support our leadership position in the field of parametric
     non-linear acoustics for sound reproduction. In October 2004, we released
     our HSS Generation III (T120 and T220) product family, which has higher
     reliability, lower distortion and higher output levels than previous
     models of our HSS products.</Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;margin-bottom:6.0pt;mso-list:l13 level1 lfo23;
     tab-stops:list .5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Our
     Long Range Acoustic Device, or LRAD technology produces variable intensity
     acoustical sound intended for use in long-range delivery of directional
     sound information, which is effectively a supercharged megaphone. LRAD
     products are designed and used as directed long-range hailing and warning
     systems by both government and commercial customers. We believe our LRAD
     product innovation, our growing engineering capabilities, and our
     manufacturing and marketing competencies have established us as the leader
     in this new marketplace. We are marketing LRAD throughout the U.S.
     Department of Defense as &#8220;The Sound of Force Protection&#153;&#8221;, and our markets
     are expanding to include law enforcement and commercial customers with
     significant security concerns. In fiscal 2004, we developed a remote
     controlled pan/tilt version of LRAD for critical infrastructure force
     protection applications, and we demonstrated our competency to engineer
     additional new sound solutions for the U.S. Department of Defense.</Font></li>
 <li style='margin:0in;font-size:12.0pt;font-family:Times;color:black;margin-bottom:6.0pt;mso-list:l13 level1 lfo23;
     tab-stops:list .5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Our
     NeoPlanar&reg; technology is a thin film magnetic speaker that produces sound
     of high quality, low distortion and high volume.&nbsp;&nbsp;NeoPlanar applications include high-end sound,
     emergency notification and public address systems. In fiscal 2004, we began
     marketing NeoPlanar for use in large indoor spaces and in outdoor environments
     for emergency notification. NeoPlanar offers customers a new capability by
     delivering remarkably intelligible communications in difficult spaces such
     as aircraft hangar bays and at distances up to one-half mile. </Font></li>
</ul>


<font size="2" face="Times New Roman">

<p align="center">- 1 -</p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
<p>&nbsp;</p>

</font>

<ul style='margin-top:0in' >
 <li style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-list:l13 level1 lfo23;tab-stops:list .5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Our SoundCluster<sup>TM</sup>
     technology is a new multi-element speaker cluster optimized for even sound
     coverage over large areas. Our SoundCluster product offers an improved
     level of intelligibility and clarity in high ambient noise environments.
     The SoundCluster satisfies flight deck safety and large area emergency
     notification requirements. The flexible and ruggedized SoundCluster design
     lends itself to installation in harsh environments, where conventional
     speakers may fail. During fiscal 2004, we deployed the first SoundCluster
     for use on a U.S. naval warship.</Font></li>
</ul>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>In
order to capitalize on our technology leadership position, we continue to focus
on our organization, management processes and business relationships.</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<ul style='margin-top:0in' >
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-list:l36 level1 lfo20;tab-stops:list .5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Organization:</Font>
 <ul style='margin-top:0in' >
  <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-list:l36 level2 lfo20;tab-stops:list 1.0in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>In fiscal 2004, we
      created a new Quality Department reporting directly to the President to
      ensure that we develop products that meet the high standards that our
      customers require.</Font></li>
  <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;margin-bottom:6.0pt;mso-list:l36 level2 lfo20;
      tab-stops:list 1.0in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>During
      fiscal 2004, we increased the size of our engineering and quality
      organization to 20 people to more rapidly expand our product
      portfolio.&nbsp;&nbsp;</Font></li>
 </ul>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-list:l36 level1 lfo20;tab-stops:list .5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Management
     Processes:</Font>
 <ul style='margin-top:0in' >
  <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-list:l36 level2 lfo20;tab-stops:list 1.0in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>In fiscal 2004, we
      continued to refine our 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 that
      meet our cost, reliability and business goals. Our new product
      developments use the phase gate development process.</Font></li>
  <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;margin-bottom:6.0pt;mso-list:l36 level2 lfo20;
      tab-stops:list 1.0in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>In
      2005, we intend to begin the ISO 9001 certification process to meet the
      needs of our customers.</Font></li>
 </ul>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-list:l36 level1 lfo20;tab-stops:list .5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Business
     Relationships:</Font>
 <ul style='margin-top:0in' >
  <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-list:l36 level2 lfo20;tab-stops:list 1.0in'><Font style='font-size:10.0pt'>We will continue to seek relationships with
      national or global partners for sales, manufacturing and distribution to
      accelerate the worldwide adoption of our products.</Font></li>
  <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-list:l36 level2 lfo20;tab-stops:list 1.0in'>
  <p style="margin-top: 1; margin-bottom: 1"><Font style='font-size:10.0pt'>The Business Group, described below, intends to
      expand HSS sales into Western Europe and Asia. The Government
      Group intends to expand LRAD and other product sales into Western Europe,
      Asia and the Middle East.</font></li>
 </ul>
</ul>
<p style="margin-top: 1; margin-bottom: 1"><b><font size="2">
<a name="Recent Developments">Recent Developments</a></font></b></p>
<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>In December 2004, we received a firm order for $4.5
million in LRAD products from ADS, Inc. for use by the U.S. Army 3rd Infantry
Division, Fort Stewart, Georgia.&nbsp; The order also includes $0.4 million in
ancillary products which we are providing on a value-added reseller basis along
with the LRAD units.&nbsp; The order calls for deliveries in December 2004 and
January 2005 and customary payment terms.&nbsp; <br>
&nbsp;</font></p>
<p style="margin-top: 1; margin-bottom: 1"><b><a name="Segment Reporting">
<font size="2">Segment Reporting</font></a></b></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>We
organize our business into two reporting segments by the end-user markets we
serve. Our Business Products and Licensing Group, or Business Group, licenses
and markets HSS and NeoPlanar products to companies that employ audio in
consumer, commercial and professional applications. Our primary focus in the
Business Group has been expanding sales of HSS. We are concentrating our
efforts on the following vertical markets:</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<ul style='margin-top:0in' >
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-list:l21 level1 lfo37;tab-stops:list .5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Digital Signage,
     sometimes referred to as &#8220;In Store Television&#8221;;</Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-list:l21 level1 lfo37;tab-stops:list .5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Command and Control
     Centers;</Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-list:l21 level1 lfo37;tab-stops:list .5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Museums and
     Displays; </Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-list:l21 level1 lfo37;tab-stops:list .5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Trade Shows and
     Conventions; and</Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-list:l21 level1 lfo37;tab-stops:list .5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Kiosks.</Font></li>
</ul>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Our
Government and Force Protection Systems Group, or Government Group, markets
LRAD, NeoPlanar, SoundCluster and HSS products to government and military
customers and to the expanding force protection and commercial security
markets. 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 continued revenue
growth for this segment in fiscal 2005. </Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;margin-top:12.0pt'><Font style='font-size:10.0pt;
font-family:"Times New Roman"'>During fiscal 2004, we improved the quality,
performance and manufacturability of our HSS products, and starting in October
of 2004, we began deliveries of our HSS Generation III (T120 and T220)
products. We also expanded our Government Group product line by adding new LRAD
features and new products. During fiscal 2004, we also expanded our Advanced
Development and Engineering departments to accelerate new product development
and support custom engineering solutions.</Font></p>

<p align="center"><font size="2" face="Times New Roman">- 2 -</font></p>
<hr size="3" color="#000080">
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  &nbsp;
</div>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;margin-top:12.0pt'>&nbsp;</p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;margin-top:12.0pt'><Font style='font-size:10.0pt;
font-family:"Times New Roman"'>We believe we are uniquely equipped to provide
our technologies and products in rapidly growing markets for new sound applications
not currently served by conventional sound devices and as an alternative to
conventional loudspeakers. We believe market factors such as the rapid growth
of plasma and flat panel screens offer significant growth opportunities for our
HSS focused sound solutions. We also believe that the growth in defense and
homeland security and related protection spending by commercial customers
provides a growing market for our sound products to be used for intelligible
communication over long distances.</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;margin-top:12.0pt'><Font style='font-size:10.0pt;
font-family:"Times New Roman"'>Our shares of common stock trade through the
NASDAQ SmallCap Market under the symbol &#8220;ATCO.&#8221;&nbsp;&nbsp;Our address is 13114 Evening Creek Drive South, San Diego,
California, our telephone number is 858-679-2114 and our internet website is
located at www.atcsd.com. We make available, free of charge through our
website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, reports filed by our directors, executive officers and
certain significant shareholders pursuant to Section 16 of the Securities
Exchange Act and all amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act of 1934 as soon as reasonably
practical after the reports are electronically filed with or furnished to the
Securities and Exchange Commission.&nbsp;&nbsp;The
information on our website is not incorporated by reference into this report
nor is it part of this report.</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-size:10.0pt;font-family:
"Times New Roman"'><a name="Our Technology and Products">Our Technology and Products</a></Font></b></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><u><Font style='font-size:10.0pt;font-family:"Times New Roman"'>HyperSonic
Sound</Font></u></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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 designs, are direct radiating, which are
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 &quot;non-linearity&quot; of air into a commercial sound
product. </Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>HSS employs ultrasonic
frequencies to carry content, e.g. music and voice, into the air. Proprietary
ultrasonic emitters, or transducers which convert electrical energy to high
frequency acoustical energy, produce these ultrasonic frequencies beyond the
range of hearing.&nbsp;&nbsp;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, which is a significant departure from a direct radiating
loudspeaker.&nbsp;&nbsp;For example, if the beam is directed towards a wall, the sound
first emanates from the surface of the wall, or if the beam is directed to a
person, the sound is created 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 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>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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 sound pollution.
In-store display advertising tends 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>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<ul style='margin-top:0in' >
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l39 level1 lfo11;
     tab-stops:list .5in left 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>The ability to
     create a beam of sound and place it only where you want it;</Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l39 level1 lfo11;
     tab-stops:list .5in left 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Elimination of the
     need for a speaker enclosure;</Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l39 level1 lfo11;
     tab-stops:list .5in left 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Reduction of the
     effect of room acoustics on sound quality;</Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l39 level1 lfo11;
     tab-stops:list .5in left 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Ability to
     manipulate or selectively position or diffuse the source of sound;</Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l39 level1 lfo11;
     tab-stops:list .5in left 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Ability to deliver
     a beam of sound over longer distances than conventional speakers;</Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l39 level1 lfo11;
     tab-stops:list .5in left 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Ability to
     penetrate other competing sounds; and</Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l39 level1 lfo11;
     tab-stops:list .5in left 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Elimination of feedback
     from live microphones.</Font></li>
</ul>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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 environments.</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p align="center"><font size="2" face="Times New Roman">- 3 -</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
<p>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>We are currently
producing and selling our HSS Generation III hypersonic sound directed audio
systems,&nbsp;&nbsp;(Model T120 and T220), which
have important improvements over prior generations including:</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<ul style='margin-top:0in' >
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l42 level1 lfo43;
     tab-stops:list .5in left 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Reduced distortion;</Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l42 level1 lfo43;
     tab-stops:list .5in left 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Slimmer package;</Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l42 level1 lfo43;
     tab-stops:list .5in left 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Wired remote
     control;</Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l42 level1 lfo43;
     tab-stops:list .5in left 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Volume thumb wheel
     with digital volume display;</Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l42 level1 lfo43;
     tab-stops:list .5in left 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Universal mounting
     studs;</Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l42 level1 lfo43;
     tab-stops:list .5in left 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Swivel mount; and</Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l42 level1 lfo43;
     tab-stops:list .5in left 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Choice of audio
     inputs including, XLR Microphone, RCA and Mini-Jack.</Font></li>
</ul>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>We expect to develop
improved electronics and emitters and introduce new HSS systems in fiscal 2005.
We seek to minimize distortion, improve output, reduce electronic packaging
size, and trim production costs to expand the applications of HSS to new
markets.</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><u><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Long Range Acoustic
Device</Font></u></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>We believe our Long
Range Acoustic Device, or LRAD, technology is a breakthrough directed acoustic
beam device for long-range hailing and warning.&nbsp;&nbsp;LRAD was developed to communicate at operationally-effective
ranges with authority and superior intelligibility, even in high ambient noise
environments. LRAD meets the need for clear voice communications at a distance
to issue instructions, influence behavior, and determine intent.&nbsp;&nbsp;LRAD was developed to support the security
needs of military, government, law enforcement and commercial customers
worldwide. Through intense marketing efforts, successful product deployments
and extensive product demonstrations, we believe that LRAD is becoming well
known by the U.S. Department of Defense as &#8220;The Sound of Force Protection&#153;&#8221;.
LRAD systems are currently in operational use in maritime, checkpoint,
vehicular, airborne, and integrated system applications by the U.S. Navy, U.S.
Marine Corps, U.S. Army and U.S. Coast Guard.&nbsp; Operational feedback by the U.S.
Navy, U.S. Marine Corps. and U.S. Army from LRAD deployment in Operation Iraqi
Freedom has been favorable. LRAD also supports applications for the Department
of Homeland Security, other government and law enforcement agencies and
customers where there is a need to protect critical high-value commercial
infrastructure, such as buildings, bridges, tunnels, dams, power plants,
pipelines, airports, sea ports, communications towers and other similar
important commercial facilities. </Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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.
naval warships both in the U.S. and in the foreign ports and restricted waters.
LRAD provides the critical long range communication and intense but not harmful
ability to&nbsp;warn away friendlies,
classify non-compliants as hostile and support lethal rules of
engagement.&nbsp;&nbsp;This ability also allows
the LRAD operator to execute proactive responses at extended distances, which
in turn increases safety and the time to diffuse tense situations, thereby potentially
saving lives on both sides of the device. In the remote-operation pan/tilt
configuration, LRAD provides a first responder, immediately escalating
non-lethal capability for protecting important commercial facilities.</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>LRAD&#146;s features include:</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<ul style='margin-top:0in' >
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l12 level1 lfo14;
     tab-stops:list .5in left 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>High source level
     acoustic transmissions with a series of phase coherent transducers;</Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l12 level1 lfo14;
     tab-stops:list .5in left 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Sound pressure
     levels in excess of 146 dB, or decibels during continuous operation at a
     distance of 1 meter with instantaneous peaks at 151 dB;</Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l12 level1 lfo14;
     tab-stops:list .5in left 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Limits to 120 dB at
     1 meter 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></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l12 level1 lfo14;
     tab-stops:list .5in left 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>A beam center of 16
     degrees on either side of center line;</Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l12 level1 lfo14;
     tab-stops:list .5in left 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Effective hailing
     distances in excess of 500 yards, warning distances in excess of 750
     yards;</Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l12 level1 lfo14;
     tab-stops:list .5in left 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Both voice and
     warning tones for determining intent for multiple applications;</Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l12 level1 lfo14;
     tab-stops:list .5in left 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Low operating power
     requirement, (400 watts); easily powered by 12/24 volt invertors;</Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l12 level1 lfo14;
     tab-stops:list .5in left 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Input flexibility from
     networks, individual microphones, and audio output hand held and wearable
     computers;</Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l12 level1 lfo14;
     tab-stops:list .5in left 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
 Easily transportable or vehicle mounted, 33&#148; diameter x 4&#148; thickness,
 lightweight at 45 lbs.; </Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l12 level1 lfo14;
     tab-stops:list .5in left 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Powerful
 and safe when used properly; and </Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l12 level1 lfo14;
     tab-stops:list .5in left 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>
 <font size="2"></font><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Highly
 directional at distance.</Font></li>
</ul>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>We also have other
customized LRAD applications under development to meet specific customer
requirements each with broad government and commercial applications.</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p align="center"><font size="2" face="Times New Roman">- 4 -</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><u><Font style='font-size:10.0pt;font-family:"Times New Roman"'>NeoPlanar Speakers</Font></u></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Our
NeoPlanar technology is a thin film planar magnetic type speaker that uses
novel films, magnetic materials and a manufacturing process that 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>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<ul style='margin-top:0in' >
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-list:l43 level1 lfo22;tab-stops:list .5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>High power handling;
     </Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-list:l43 level1 lfo22;tab-stops:list .5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Low mass;</Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-list:l43 level1 lfo22;tab-stops:list .5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>High durability; </Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-list:l43 level1 lfo22;tab-stops:list .5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Superior sound
     quality; </Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-list:l43 level1 lfo22;tab-stops:list .5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>High sensitivity; </Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-list:l43 level1 lfo22;tab-stops:list .5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>High sound pressure
     levels; </Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-list:l43 level1 lfo22;tab-stops:list .5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Extended high
     frequency output compatible with new compact disk standards; and</Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-list:l43 level1 lfo22;tab-stops:list .5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Exceptional clarity
     over long distances.</Font></li>
</ul>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>At
present, 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 configuration. 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:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>NeoPlanar
technology provides a loud and clear outdoor and indoor public address and
emergency response communication system for military, government and commercial
facilities and areas.&nbsp;&nbsp;Due to their
unique intelligibility in high ambient noise environments and robust
survivability in most operational environments, NeoPlanar products are useful
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.
Outdoors, NeoPlanar provides an effective range, up to approximately a half mile, of
clear high fidelity-quality communication even over high ambient noise.</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><u><Font style='font-size:10.0pt;font-family:"Times New Roman"'>SoundCluster</Font></u></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>SoundCluster
is a series of specifically engineered clusters of conventional high intensity
ruggedized speakers modeled and designed to provide scalable highly intelligible
and even sound coverage across the large areas.&nbsp;&nbsp;For example, our first SoundCluster installation was for the
flight deck of the USS Stennis (CVN-74), one of the most challenging acoustic
environments anywhere.&nbsp;&nbsp;The U.S. Navy is
considering SoundCluster as a permanent replacement for the aging 5MC flight
deck system. With this product, we have demonstrated that in addition to core
proprietary technologies, we possess the core competency to provide a
comprehensive engineered solution for unique industry acoustic challenges. <br>
&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-pagination:widow-orphan lines-together;
tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><u><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Other Proprietary
Technologies</Font></u></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>We have other sound
inventions and technologies in various stages of development including our
PureBass&reg; Woofer technology for low frequency speakers, our Stratified Field
Technology, or SFT&reg;, that employs a thin form, non-magnetic film to produce
high quality sound, and other technologies and products in various stages of
development. In 2005, we expect our sales efforts to be focused on HSS, LRAD,
NeoPlanar and SoundCluster.</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-size:10.0pt;font-family:
"Times New Roman"'><a name="Operating Segment Information">Operating Segment Information</a></Font></b></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>We organize our business
into two reportable segments by the end-user markets we serve. Our Business
Products and Licensing Group (Business Group) licenses and markets HSS and
NeoPlanar speakers to companies that employ audio in consumer, commercial and
professional applications. Our Government and Force Protection Systems Group (Government
Group) markets LRAD, NeoPlanar, SoundCluster and HSS products to government and
military customers and to the expanding force protection and commercial
security markets.</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-size:10.0pt;font-family:
"Times New Roman"'><a name="Business Group">Business Group</a></Font></b></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Our Business Group
licenses and markets HSS and NeoPlanar technology and products to companies
which employ audio in consumer, commercial, industrial and professional
applications.&nbsp;&nbsp;Our Business Group's
primary marketing focus in fiscal 2005 will be on HSS product sales. Consumer
applications for our products include home theater, consumer electronics,
vehicle and computer multimedia sound systems. Commercial and industrial
applications include digital signage, public address systems, 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:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p align="center"><font size="2" face="Times New Roman">- 5 -</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>We sell our products to
a range of customers including end-users, Original Equipment Manufacturers, or
OEMs, who package our sound products with other products and system solutions,
and to distributors who sell our products to others.</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Our HSS strategy is to
drive use in growing markets that can benefit from directed or narrowcast
sound. The following are some key growing markets: </Font></p>

<ul>
  <li>

<p  align=left style='text-align:center;font-size:14.0pt;font-family:"Times New Roman";color:black;text-align:left; margin-left:0in; margin-right:0in; margin-top:0in; margin-bottom:0.05in'>
<Font style='font-size:10.0pt;'><b>Digital Signage</b> - Digital Signage is a generic term used to describe the replacement of static, or passive, signs or displays with video screens such as cathode ray tube, or CRT, plasma, liquid crystal display, or LCD, or light-emitting diode, or LED, which may contain still or motion video images.&nbsp;&nbsp;The image content, usually 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><Font style='font-size:10.0pt;font-family:Times'>
<li>

<p style='font-size:12.0pt;font-family:"Times New Roman";color:black;tab-stops:.1in .2in .3in .4in 313.9pt decimal 375.8pt left 408.2pt decimal 6.4in; margin-left:0in; margin-right:0in; margin-top:0in; margin-bottom:0.05in'><Font style='font-size:10.0pt'>
<b>Command and Control Centers </b>&#150; Command and Control Centers require directed audio so that a person monitoring a control station can clearly hear alarms and notifications without disturbing someone that is monitoring an adjacent control station.</p>

</li>
</Font>
<li>

<p style='font-size:12.0pt;font-family:"Times New Roman";color:black;tab-stops:.1in .2in .3in .4in 313.9pt decimal 375.8pt left 408.2pt decimal 6.4in; margin-left:0in; margin-right:0in; margin-top:0in; margin-bottom:0.05in'><Font style='font-size:10.0pt'>
<b>Museums and Comparable Display Facilities </b>- Directional audio is required in museums and similar facilities to focus audio information in targeted areas without distracting other patrons.&nbsp;&nbsp;It is also required to allow multiple audio programs to be played within a confined space. </p>

</li>
</Font>
<li>

<p style='font-size:12.0pt;font-family:"Times New Roman";color:black; margin-left:0in; margin-right:0in; margin-top:0in; margin-bottom:0.05in'><Font style='font-size:10.0pt'>
<b>Trade Show and Conventions </b>- Trade 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. </p>

</li>
</Font>
<li>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:"Times New Roman";color:black;'><Font style='font-size:10.0pt'>
<b>Kiosks</b> - Retail point of purchase or information kiosks require directional audio to contain sound within the immediate space of the kiosk and to maintain some privacy for each individual listener.<br>
&nbsp;</Font></p>

</li>
</ul>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;Our
NeoPlanar 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>

<ul>
  <li>

<p style='font-size:12.0pt;font-family:Times;color:black;margin-left:.75in;text-indent:-.25in;mso-pagination: widow-orphan lines-together; tab-stops:list .75in;font-size:10.0pt;font-family:"Times New Roman"; margin-right:0in; margin-top:0in; margin-bottom:0.05in'>
<Font style='font-size:10.0pt; '>Industrial applications such as factories, airports and other large facilities;</p>

  </li>
  </font>
  <li>

<p style='font-size:12.0pt;font-family:Times;color:black;margin-left:.75in;text-indent:-.25in;mso-pagination: widow-orphan lines-together; tab-stops:list .75in;font-size:10.0pt;font-family:"Times New Roman"; margin-right:0in; margin-top:0in; margin-bottom:0.05in'>
<Font style='font-size:10.0pt; '>Vehicles;</p>

  </li>
  </font>
  <li>

<p style='font-size:12.0pt;font-family:Times;color:black;margin-left:.75in;text-indent:-.25in; tab-stops:list .75in;font-size:10.0pt;font-family:"Times New Roman"; margin-right:0in; margin-top:0in; margin-bottom:0.05in'>
<Font style='font-size:10.0pt; '>Coupling with flat panel displays;</p>

  </li>
  </font>
  <li>

<p style='font-size:12.0pt;font-family:Times;color:black;margin-left:.75in;text-indent:-.25in; tab-stops:list .75in;font-size:10.0pt;font-family:"Times New Roman"; margin-right:0in; margin-top:0in; margin-bottom:0.05in'>
<Font style='font-size:10.0pt; '>Multimedia;</p>

  </li>
  </font>
  <li>

<p style='font-size:12.0pt;font-family:Times;color:black;margin-left:.75in;text-indent:-.25in; tab-stops:list .75in;font-size:10.0pt;font-family:"Times New Roman"; margin-right:0in; margin-top:0in; margin-bottom:0.05in'>
<Font style='font-size:10.0pt; '>Public address systems; and</p>

  </li>
  </font>
  <li>

<p style='font-size:12.0pt;font-family:Times;color:black;margin-left:.75in;text-indent:-.25in; tab-stops:list .75in;font-size:10.0pt;font-family:"Times New Roman"; margin-right:0in; margin-top:0in; margin-bottom:0.05in'>
<Font style='font-size:10.0pt; '>High-end audio. </p>

  </li>
</ul>
</font>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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.</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-size:10.0pt;font-family:
"Times New Roman"'><a name="Government Group">Government Group</a></Font></b></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in;font-size:10.0pt;font-family: "Times New Roman"'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Late in fiscal 2003, we organized our Government Group to design, manufacture and market LRAD, NeoPlanar and HSS products for military, government and the developing force protection and emergency response markets, including commercial applications. During fiscal 2004, we demonstrated the market potential for LRAD, particularly with wartime implementations in Operation Iraqi Freedom.&nbsp;&nbsp;We also completed key projects featuring the unique capabilities of NeoPlanar that have established our capabilities as an acoustic engineered solution provider.&nbsp;We are actively </Font><Font style='font-size:10.0pt;font-family:"Times New Roman"; color:windowtext'>expanding </Font>relationships with the U.S. Department of Defense, U.S. Department of Home
land Security, other U.S. government agencies, major port authorities and police departments, international government agencies and commercial infrastructure security systems integrators.&nbsp;&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:1 0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in;font-size:10.0pt;font-size:10.0pt;font-family:"Times New Roman"'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>During fiscal 2004, we developed an automated pan/tilt model of LRAD for use in a wide variety of applications requiring a remotely operated force protection capability.&nbsp;&nbsp;Our initial customer was the Naval Surface Warfare Center (NSWC), Crane, Indiana, for integration into the Integrated Radar Sighting Surveillance System, or IROS3, for surface combatants, and the Aircraft Carrier Situational Awareness System, or ACSAS.&nbsp;&nbsp;</Font>ACSAS and IROS3 are the U.S. Navy&#146;s 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 adds capability to the integrated optics, comma
nd and control, and lethal weapon suite by providing a simple, repeatable and reliable way to determine intent through long range hailing and warning.&nbsp;Our LRAD
models are also positioned to support a first responder capability for critical
infrastructure protection for buildings, dams, bridges, tunnels, airports, power
plants, pipelines, ports, communication towers, water treatment facilities and
other similar important commercial facilities.</p>

<Font style='font-size:10.0pt;font-family:Times'>

<p align="center"><font size="2" face="Times New Roman">- 6 -</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>

</font>

<p style='margin:1 0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

<p style="margin-top: 1; margin-bottom: 1">In December 2004,
we received a firm order for $4.5 million in LRAD products from ADS, Inc. for
use by the U.S. Army 3rd Infantry Division, Fort Stewart, Georgia.&nbsp; The order also
includes $0.4 million in ancillary products which we are providing on a
value-added reseller basis along with the LRAD units.</p>
<p style='margin:1 0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

<p style='margin:1 0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>During fiscal 2004, we
also developed SoundCluster, a new product for which the initial implementation
was on the flight deck of a U.S. Navy aircraft carrier.</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>The
landscape of the global defense industry continues to evolve as events, such as
those of September&nbsp;11, 2001 and Operation Iraqi Freedom, demand
alternative strategic defense initiatives. The defense requirements of the
United States have shifted from defending against Cold War era threats to
focusing on the management of one or more regional conflicts, homeland security
and proactive threat identification. As a result of this shift towards low
intensity conflicts and military operations other than war, the defense
industry is influenced by several key factors which also may impact our
Government Group, such as those factors listed below.</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<ul style='margin-top:0in' >
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-list:l1 level1 lfo39;tab-stops:list .5in'>
 <p style="margin-bottom: 0.05in"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>New funding is
     available to implement new technologies to meet modern threats.</Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-list:l1 level1 lfo39;tab-stops:list .5in'>
 <p style="margin-bottom: 0.05in"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>There is increased
     focus on force protection through threat identification, and non-lethal
     capabilities. </Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-list:l1 level1 lfo39;tab-stops:list .5in'>
 <p style="margin-bottom: 0.05in"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>As a result of
     consolidation in the industry, domestic prime contractors are relying on
     others to provide subsystems and components.</Font></li>
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-list:l1 level1 lfo39;tab-stops:list .5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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.<br>
&nbsp;</Font></li>
</ul>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Our strategy is to
position LRAD, NeoPlanar, and our other engineered solutions 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>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<ul style='margin-top:0in' >
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l10 level1 lfo19;
     tab-stops:list .5in left 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>LRAD</Font>
 <ul style='margin-top:0in' >
  <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l10 level2 lfo19;
      tab-stops:list 1.0in left 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>
  <p style="line-height: 100%"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Sold and installed on ships in the 5<sup>th</sup> fleet in and around the Basra,
      Iraq, area of the Persian Gulf to support maritime interdiction, such as
      board, search and seizure operations and oil terminal protection
      operations.</Font></li>
  <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l10 level2 lfo19;
      tab-stops:list 1.0in left 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>
  <p style="line-height: 100%"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Sold and delivered
      units to the 1<sup>st</sup> Marine Expeditionary Force and 3<sup>rd</sup>
      Marine Aircraft Wing deployed in and around Fallujah, Iraq, for Operation
      Iraqi Freedom.&nbsp;&nbsp;LRAD has been
      added to the force protection kits, and deployed with several Marine
      Expeditionary Units.</Font></li>
  <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l10 level2 lfo19;
      tab-stops:list 1.0in left 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>
  <p style="line-height: 100%"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Sold and delivered
      units to the U.S. Army Rapid Expeditionary Force, and to the 3<sup>rd</sup>
      Battalion, 2<sup>nd</sup> Infantry Division Stryker force deployed in and
      around Mosul, Iraq in support of Operation Iraqi Freedom.</Font></li>
  <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l10 level2 lfo19;
      tab-stops:list 1.0in left 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>
  <p style="line-height: 100%"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Delivered units to
      the New York Police Department for use in crowd control for the
      Republican National Convention.</Font></li>
  <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l10 level2 lfo19;
      tab-stops:list 1.0in left 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>
  <p style="line-height: 100%"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Developed a
      remotely operated pan/tilt model for use in protecting U.S Navy vessels
      against small boat terrorist threats. </Font></li>
  <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l10 level2 lfo19;
      tab-stops:list 1.0in left 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>
  <p style="line-height: 100%"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Sold the remotely
      operated pan/tilt model to the Port Authority of New York/New Jersey for
      an initial infrastructure protection system project on the critical rail
      Hackensack Bridge.</Font></li>
  <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l10 level2 lfo19;
      tab-stops:list 1.0in left 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>
  <p style="line-height: 100%"><font size="2">
  Received a large order for LRAD
  units to be deployed by the U.S. Army 3rd Infantry Division, Fort Stewart,
  Georgia.</font></li>
 </ul>
</ul>

 <p style="line-height: 100%">&nbsp;<Font style='font-size:10.0pt;font-family:Times'><p align="center"><font size="2" face="Times New Roman">- 7-</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>

</font>

 <p style="line-height: 100%">&nbsp;<ul style='margin-top:0in' >
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l10 level1 lfo19;
     tab-stops:list .5in left 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>
 <p style="line-height: 100%"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>NeoPlanar</Font>
 <ul style='margin-top:0in' >
  <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l10 level2 lfo19;
      tab-stops:list 1.0in left 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>
  <p style="line-height: 100%"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Delivered and
      installed a waterfront hailing system for shipyard protection sponsored
      by the Naval Sea Systems Command to demonstrate improved communication
      intelligibility at long distances over varying levels of ambient noise. </Font></li>
  <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l10 level2 lfo19;
      tab-stops:list 1.0in left 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>
  <p style="line-height: 100%"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Delivered and
      installed NeoPlanar Sound Bars for a newly constructed Navy aircraft
      hangar sponsored by the Naval Facilities Command.</Font></li>
  <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l10 level2 lfo19;
      tab-stops:list 1.0in left 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>
  <p style="line-height: 100%"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Delivered and
      installed NeoPlanar Sound Bars in a secure building sponsored by the
      Naval Facilities Command.</Font></li>
  <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l10 level2 lfo19;
      tab-stops:list 1.0in left 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>
  <p style="line-height: 100%; margin-top:1; margin-bottom:1"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Delivered and
      installed NeoPlanar Sound Bars and Sound Squares to a private academy for
  a campus emergency response system and to replace existing athletic
      field systems.</Font></li>
 </ul>
</ul>

  <p style="line-height: 100%; margin-top:1; margin-bottom:1">&nbsp;<ul style='margin-top:0in' >
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l10 level1 lfo19;
     tab-stops:list .5in left 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>
 <p style="line-height: 100%; margin-top:1; margin-bottom:1"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>SoundCluster</Font>
 <ul style='margin-top:0in' >
  <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l10 level2 lfo19;
      tab-stops:list 1.0in left 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>
  <p style="line-height: 100%"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Delivered a
      SoundCluster system to the U.S. Navy for evaluation on the USS Stennis
      (CVN-74) to replace the aging 5MC carrier flight deck sound system.</Font></li>
 </ul>
</ul>

<ul style='margin-top:0in' >
 <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l10 level1 lfo19;
     tab-stops:list .5in left 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>
 <p style="line-height: 100%"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>HSS:</Font>
 <ul style='margin-top:0in' >
  <li  style='margin:0in;font-size:12.0pt;font-family:Times;color:black;line-height:normal;mso-list:l10 level2 lfo19;
      tab-stops:list 1.0in left 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>
  <p style="line-height: 100%"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Supported
      evaluations by government agencies for next generation command center
      communications.</Font></li>
 </ul>
</ul>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>We
believe other military branches, government agencies and allied forces will
increasingly employ LRAD systems for long range hailing and warning as part of
their force protection strategies.</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Our
Government Group sells products directly to end-user customers and also to
agents and distributors specializing in military, government and commercial
security sales.</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-size:10.0pt;font-family:
"Times New Roman"'><a name="Manufacturing and Suppliers">Manufacturing and Suppliers</a></Font></b></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>We believe establishing
and maintaining quality manufacturing capacity is essential to the performance
of our products and the growth of our business.</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>During
fiscal 2004, our manufacturing was spread amongst several internal and external
resources. NeoPlanar manufacturing for both commercial and government systems
remains located in our Carson City, Nevada facility. LRAD and HSS manufacturing
transitioned from our San Diego facility to a contract manufacturer, Pemstar,
Inc. in San Jose California.  </Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
<br>
</Font><Font style='font-size:10.0pt;font-family:"Times New Roman"'>We  </Font><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
currently purchase completed products from Pemstar.&nbsp;&nbsp;These units are stored in
Pemstar warehouses and are shipped directly to our customers as required.&nbsp;&nbsp;Our strategy is to increasingly utilize Pemstar's global contract
manufacturing capabilities to allow us to meet our growing production needs.</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
We have refined our internal business processes to improve how we design, test
and qualify product designs.&nbsp;&nbsp;We have implemented more rigorous manufacturing
and quality processes to track production and field failures.&nbsp;&nbsp;Key metrics for
line yields, warranty returns, root cause analysis and ongoing reliability
testing are being tracked.&nbsp;</Font><Font style='font-size:10.0pt;font-family:"Times New Roman"'>We
expect HSS, LRAD and NeoPlanar product lines to ramp production during 2005.</Font><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Suppliers
are key members of our production chain and are selected and managed
accordingly.&nbsp;&nbsp;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:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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 other 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:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<Font style='font-size:10.0pt;font-family:Times'>

<p align="center"><font size="2" face="Times New Roman">- 8-</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>

</font>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-size:10.0pt;font-family:
"Times New Roman"'><a name="Selling, Marketing and Customers">Selling, Marketing and Customers</a></Font></b></p>

</font><Font style='font-size:10.0pt;'>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>
<Font style='font-size:10.0pt' face="Times New Roman">We market and sell products
and services through our direct sales force based in San Diego, California and
Topsham, Maine, and our administrative offices are located in San Diego,
California.&nbsp;&nbsp;Our sales and marketing
strategy is to secure orders for our products and services by, among other
things, providing high performance products that meet customer&#146;s need for
communication and notification in acoustically challenging environments.&nbsp;&nbsp;Sales and marketing expenses include
commission expense for our in-house sales people and the cost of participation
in technical conferences, preparation of marketing collateral materials, and
the acquisition of studies and other materials pertaining to our target markets
and customers.</Font></p>

</font><Font style='font-size:10.0pt;font-family:'>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in;font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in;font-size:10.0pt;font-family:"Times New Roman"'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>For fiscal year ended September 30, 2004, sales of sound products to two Government Group customers, ADS, Inc. and General Dynamics, Armaments and Technical Products, Inc. accounted for </Font><Font style='font-size:10.0pt;font-family:"Times New Roman"; color:windowtext'>47</Font>% and <Font style='font-size:10.0pt;font-family:"Times New Roman"; color:windowtext'>11</Font>% of revenues
respectively, with no other single customer accounting for more than 10% of revenues.&nbsp;&nbsp;ADS, Inc. is a reseller of our products via a prime vendor contract vehicle to end users in various branches of the military such as the U.S. Navy, U.S. Marine Corps, U.S. Army and the Department of Homeland Security.</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>For the 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:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Our revenues have to
date relied on a few major customers.&nbsp;The loss of any customer could have a material adverse effect on our
financial condition, results of operations and cash flows.&nbsp;&nbsp;However, our goal is to diversify sound
technology revenues in future periods.</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>We do not consider order
backlog to be an important measure of future performance at this time.&nbsp;&nbsp;Our order backlog was approximately $316,000
at September 30, 2004. Backlog orders are subject to cancellation or
rescheduling by our customers.</Font></p>

<Font style='font-size:10.0pt;font-family:Times'>

</font>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-size:10.0pt;font-family:
"Times New Roman"'><a name="Warranties">Warranties</a></Font></b></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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 to stock 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:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>In fiscal 2003, due to
performance failures of some of our first generation of HSS systems resulting
primarily from a vacuum emitter component, we agreed to replace emitters on
approximately 700 HSS Generation I units. At September 30, 2004, we had a
warranty reserve of $331,917 of which $186,454 was for HSS Generation I units.
Warranty costs on other products have not been material.</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-size:10.0pt;font-family:
"Times New Roman"'><a name="Competition">Competition</a></Font></b></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Our technologies and
products compete with those of other companies. The consumer, commercial and
government audio industry markets are fragmented and competitive and include
numerous manufacturers with audio products that vary widely in price, quality
and distribution channels. Manufacturers of consumer and commercial speakers
include Harman International, Bose, Boston Acoustics and many others. Suppliers
of government audio industry speakers include IML Sound Commander, Technomad
Inc, ATI, Dynalec, Henschel and others. 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:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Our HSS and NeoPlanar
products are offered by both our Business Group and our Government Group. We
believe HSS is the leading parametric speaker with limited direct competition
to date. 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 who compared 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. However, these parametric speaker competitors or others
may introduce products with features and performance competitive to our
products. </Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<Font style='font-size:10.0pt;font-family:Times'>

<p align="center"><font size="2" face="Times New Roman">- 9-</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>

</font>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in;font-size:10.0pt;font-family:"Times New Roman"'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>We also believe our NeoPlanar technology is novel and has distinct market attributes compared to existing and competing flat panel and traditional speaker designs. We believe our NeoPlanar technology produces high intelligibility and reliability for a range of consumer, commercial and government applications. Other companies that are focusing marketing efforts in the flat panel market segment include, but are not limited to (i)&nbsp;high-end electrostatic flat panel manufacturers such as Martin Logan and others, (ii)&nbsp;NXT Plc and its licensees employing the NXT flat panel technology, which uses a magnetic actuator to produce vibrations over a rigid panel, (iii)&nbsp;NCT Group, Inc. and their Gekko line of flat panel speakers using a comparable a
ctuated panel. We are not aware of companies offering flat panel technology to the government market comparable to our government NeoPlanar Products, but </Font><Font style='font-size:10.0pt; font-family:"Times New Roman";color:windowtext'>others may </Font>introduce products with features and performance competitive to our government NeoPlanar products. </p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in;font-size:10.0pt;font-family:"Times New Roman"'><Font style='font-size:10.0pt;font-family:"Times New Roman";color:windowtext'>Our LRAD and SoundCluster technology and products are 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's desired specifications for force protection hailing and non-lethal weapon applications. However, other companies supply a variety of sound products for government customers varying in performance, quality, price and distribution channels, and these products may become more competitive to our products.&nbsp;&nbsp;Others may also modify existing products or </Font>offer new products with features and performance competitive to our LRAD and SoundCluster product
s.</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-size:10.0pt;font-family:
"Times New Roman"'><a name="Seasonality">Seasonality</a></Font></b></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>We have not experienced
any significant seasonality trends to date. Seasonality trends may occur 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.&nbsp;&nbsp;Our
Government Group business has not experienced this seasonality during calendar
year 2004, but we expect increasing seasonality in the future.</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<Font style='font-size:10.0pt;font-family:Times'>

</font>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-size:10.0pt;font-family:
"Times New Roman"'><a name="Government Regulation and Environmental Matters">Government Regulation and Environmental Matters</a></Font></b></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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 &#8220;FCC&#8221;). 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:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='font-size:12.0pt;font-family:Times;color:black;margin-bottom:12.0pt;margin-left:0in; margin-right:0in; margin-top:0in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Some of our products may
be subject to certain export controls by the U.S. government in accordance with
various statutory authorities (including, for example the Trading with the
Enemy Act of 1917, the Arms Export Control Act of 1976, the Export
Administration Act of 1979 or the International Emergency Economic Powers Act),
regulations and related executive orders.&nbsp;These controls affect the export of products and services to foreign
customers and foreign business partners, in addition to exports to foreign
persons generally (including ATC employees who are foreign persons or foreign
regulatory bodies). </Font></p>

<p style='font-size:12.0pt;font-family:Times;color:black;margin-bottom:12.0pt;margin-left:0in; margin-right:0in; margin-top:0in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Generally speaking,
there are three U.S. regulatory systems in place to implement these export
control laws:&nbsp;&nbsp;</Font></p>

<p style='font-size:12.0pt;font-family:Times;color:black;margin-bottom:12.0pt;margin-left:0in; margin-right:0in; margin-top:0in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>The first main
regulatory system is administered by the U.S. Department of Treasury, Office of
Foreign Asset Control (OFAC), which administers and enforces economic and
trade sanctions based on U.S. foreign policy and national security goals
against targeted individuals and specifically identified foreign
countries.&nbsp;&nbsp;None of our current business
dealings or business plans implicates the OFAC regulations.&nbsp;&nbsp;</p>

<Font style='font-size:10.0pt;font-family:Times'>

<p align="center"><font size="2" face="Times New Roman">- 10-</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>

</font>

<p>The second main regulatory system is administered by the U.S. Department of State, Directorate of Defense Trade Controls (DDTC), which administers the International Traffic in Arms Regulations (ITAR).&nbsp;&nbsp;The ITAR requires licenses for the export of any product, service or technology that is specifically designed or adapted for a military application and is listed on the United States Munitions List.&nbsp;&nbsp;Since our products are directional speaker systems designed for both commercial and government use, we do not believe that our technologies will fall under ITAR restrictions.&nbsp;&nbsp;However, it is possible that </Font>some of our products may be deemed to have been specifically designed or adapted for military application and, if so, would be regulated under the ITAR<Font style='font-size:10.0pt;font-family:"Times New Roman"; color:#333333'>.&nbsp;&nbsp;</Font>For products, services or technology regulated under the ITAR, we will be required to submit an application for and obtain an exp
ort license to DDTC before exporting ITAR-controlled products, services or technology.</p>

<Font style='font-size:10.0pt;font-family:Times'>

</font>

<p style='font-size:12.0pt;font-family:Times;color:black;margin-bottom:12.0pt;margin-left:0in; margin-right:0in; margin-top:0in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>The third main
regulatory system is administered by the U.S. Department of Commerce, Bureau of
Industry and Security (BIS), which administers the Export Administration
Regulations (EAR).&nbsp;&nbsp;The EAR requires
licenses only for certain products, services or technology that potentially
have both commercial and military uses.&nbsp;Whether a license is required involves analysis of the end use of the
product, as well as the destination country for the product, service or technology.&nbsp;&nbsp;We believe that products such as HSS, LRAD
and NeoPlanar are subject to the EAR because they have commercial applications
and, unless specifically customized for military applications, were not, in
their standard configurations, specifically designed for military use.&nbsp;&nbsp;Application of the EAR is generally routine,
and every company doing business in an international market must comply with
these regulations. </Font></p>

<p style='font-size:12.0pt;font-family:Times;color:black;margin-bottom:12.0pt;margin-left:0in; margin-right:0in; margin-top:0in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>We intend to comply with
all applicable laws and regulations, as required, in the export of our
products.&nbsp;&nbsp;</Font></p>

<p style='font-size:12.0pt;font-family:Times;color:black;margin-bottom:12.0pt;margin-left:0in; margin-right:0in; margin-top:0in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>As a defense contractor
or subcontractor, our contract costs may be subject to audit and review by the
U.S. Government. Routine 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.&nbsp;Suspension or debarment may also limit a company's ability to obtain
future subcontracts, to receive task orders on certain existing contracts, or
to have options exercised on existing contracts.&nbsp;&nbsp;Additionally, if a company is suspended or debarred the U.S.
Government can suspend or revoke a company's foreign export privileges.&nbsp;&nbsp;We are not currently subject to any
suspension or debarment proceedings, nor are we the subject of any
investigation by the U.S. Government.&nbsp;&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-size:10.0pt;font-family:
"Times New Roman"'>
<a name="Intellectual Property Rights and Proprietary Information">Intellectual Property Rights and Proprietary Information</a></Font></b></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>We have a substantial
base of intellectual property assets. We have 38 issued U.S. patents and 4
issued international patents.&nbsp;&nbsp;We also
have approximately 33 U.S. and 91 international patents pending on our
proprietary sound technologies. Our issued patents expire between 2006 and
2021. 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:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>
<p align="center"><font size="2" face="Times New Roman">- 11 -</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>

</font><Font style='font-size:10.0pt;'>

<table border=0 cellspacing=0 cellpadding=0 style='mso-cellspacing:0in;
 mso-padding-alt:0in 0in 0in 0in' width="658">
 <tr>
  <Font style='font-size:10.0pt;font-weight:700; layout-grid-mode:line; color:windowtext'>
  <td valign=top style='width:425;'>
  <div style="border-top-style: solid; border-top-width: 2; border-bottom-style: solid; border-bottom-width: 1">
    <p style="margin-top: 6pt; margin-bottom: 6pt">Key Patent Title</div>
  </td>
  </font></font>
  <Font style='font-size:10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'>
  <td valign=top style='width:74;'>
  <div style="border-top: 2px solid #000000">
    <p style="margin-top: 6pt; margin-bottom: 6pt">&nbsp;</div>
  </td>
  </font><Font style='font-size:10.0pt;'>

  <Font style='font-size:10.0pt;font-weight:700; layout-grid-mode:line; color:windowtext' face="Times New Roman">
  <td valign=top style='width:483;'>
  <div style="border-top-style: solid; border-top-width: 2; border-bottom-style: solid; border-bottom-width: 1">
    <p style="margin-top: 6pt; margin-bottom: 6pt">Coverage</div>
  </td>
  </font>
 </tr>
 </font><Font style='font-size:10.0pt;font-family:Times'>

 <tr>
  <td valign=top style='border-bottom:1px dotted #000000; width:425;'>
  <p style="margin-top: 6pt; margin-bottom: 6pt"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Acoustic Heterodyne Device and Method</Font></td>
  <td valign=top style='border-bottom:1px dotted #000000; width:74;'>
  <p style="margin-top: 6pt; margin-bottom: 6pt">&nbsp;</td>
  <td valign=top style='border-bottom:1px dotted #000000; width:483;'>
  <p style="margin-top: 6pt; margin-bottom: 6pt"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Virtual loudspeaker projection, controlling virtual
projection attributes and direction with a computer driver and in ear applications for HSS<br>
&nbsp;</Font></td>
 </tr>
 </font>
</table>

<Font style='font-size:10.0pt; font-family:Times'>

<Font style='font-size:10.0pt;font-family:Symbol'>
</font>

</font>

<table border=0 cellspacing=0 cellpadding=0 style='mso-cellspacing:0in;
 mso-padding-alt:0in 0in 0in 0in' width="658">
 <Font style='font-size:10.0pt;font-family:Times'>

 <tr>
  <td valign=top style='border-bottom:1px dotted #000000; width:425;'>
  <p style="margin-top: 6pt; margin-bottom: 6pt"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Piezoelectric Film Sonic Emitter</Font></td>
  <td valign=top style='border-bottom:1px dotted #000000; width:74;'>
  <p style="margin-top: 6pt; margin-bottom: 6pt">&nbsp;</td>
  <td valign=top style='border-bottom:1px dotted #000000; width:483;'>
  <p style="margin-top: 6pt; margin-bottom: 6pt"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Piezoelectric film based emitters<br>
&nbsp;</Font></td>
 </tr>
 <tr>
  <td valign=top style='border-bottom:1px dotted #000000; width:425;'>
  <p style="margin-top: 6pt; margin-bottom: 6pt">
  <Font style='font-size:10.0pt; font-family:Times'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Parametric Loudspeaker w/ Electro-Acoustical<br>
  </Font><Font style='font-size:10.0pt;font-family:"Times New Roman"'>One
stage Diaphragm Transducer<br>
&nbsp;</Font></font></td>
  <td valign=top style='border-bottom:1px dotted #000000; width:74;'>
  <p style="margin-top: 6pt; margin-bottom: 6pt">&nbsp;</td>
  <td valign=top style='border-bottom:1px dotted #000000; width:483;'>
  <p style="margin-top: 6pt; margin-bottom: 6pt"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  All film type transducers for HSS</Font></td>
 </tr>
</table>

<Font style='font-size:10.0pt'>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<Font style='font-size:10.0pt;font-family:Symbol'>

</font>

<table border=0 cellspacing=0 cellpadding=0 style='mso-cellspacing:0in;
 mso-padding-alt:0in 0in 0in 0in' width="658" height="286">
 <tr>
  <Font style='font-size:10.0pt;font-family:Symbol'>

  <td valign=top style='border-bottom:1px dotted #000000; width:425;' height="33">
  <p style="margin-top: 6pt; margin-bottom: 6pt">
  <Font style='font-size:10.0pt; font-family:Symbol'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Modulator Processing for a Parametric</Font><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Loudspeaker<br>
&nbsp;</Font></font></td>
  <td valign=top style='border-bottom:1px dotted #000000; width:74;' height="33">
  <p style="margin-top: 6pt; margin-bottom: 6pt">&nbsp;</td>
  <td valign=top style='border-bottom:1px dotted #000000; width:483;' height="33">
  <p style="margin-top: 6pt; margin-bottom: 6pt"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Advanced distortion correction</Font></td>
  </font>
 </tr>
 <tr>
  <Font style='font-size:10.0pt;font-family:Symbol'>

  <td valign=top style='border-bottom:1px dotted #000000; width:425;' height="47">
  <p style="margin-top: 6pt; margin-bottom: 6pt">
  <Font style='font-size:10.0pt; font-family:Symbol'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Parametric Loudspeaker with Improved Phase </Font><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Characteristics<br>
&nbsp;</Font></font></td>
  <td valign=top style='border-bottom:1px dotted #000000; width:74;' height="47">
  <p style="margin-top: 6pt; margin-bottom: 6pt">&nbsp;</td>
  <td valign=top style='border-bottom:1px dotted #000000; width:483;' height="47">
  <p style="margin-top: 6pt; margin-bottom: 6pt"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Ideal tuning of parametric carriers for <br>
  maximum efficiency</Font></td>
  </font>
 </tr>
 <tr>
  <Font style='font-size:10.0pt;font-family:Symbol'>

  <td valign=top style='border-bottom:1px dotted #000000; width:425;' height="47">
  <p style="margin-top: 6pt; margin-bottom: 6pt"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Power Amplification for Parametric Loudspeakers</Font></td>
  <td valign=top style='border-bottom:1px dotted #000000; width:74;' height="47">
  <p style="margin-top: 6pt; margin-bottom: 6pt">&nbsp;</td>
  <td valign=top style='border-bottom:1px dotted #000000; width:483;' height="47">
  <p style="margin-top: 6pt; margin-bottom: 6pt"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  All high efficiency switch-mode power amplifiers<br>
for HSS<br>
&nbsp;</Font></td>
  </font>
 </tr>
 <tr>
  <Font style='font-size:10.0pt;font-family:Symbol'>

  <td valign=top style='border-bottom:1px dotted #000000; width:425;' height="47">
  <p style="margin-top: 6pt; margin-bottom: 6pt"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Parametric Virtual Speaker and Surround Sound System<br>
&nbsp;</Font></td>
  <td valign=top style='border-bottom:1px dotted #000000; width:74;' height="47">
  <p style="margin-top: 6pt; margin-bottom: 6pt">&nbsp;</td>
  <td valign=top style='border-bottom:1px dotted #000000; width:483;' height="47">
  <p style="margin-top: 6pt; margin-bottom: 6pt"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>HSS for virtual surround sound </Font>
  </td>
  </font>
 </tr>
 <tr>
  <Font style='font-size:10.0pt;font-family:Symbol'>

  <td valign=top style='border-bottom:1px dotted #000000; width:425;' height="47">
  <p style="margin-top: 6pt; margin-bottom: 6pt">
  <Font style='font-size:10.0pt; font-family:Symbol'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Pre-encoded Signals for Playback though a <br>
  </Font><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Parametric
  Loudspeaker System</Font></font></td>
  <td valign=top style='border-bottom:1px dotted #000000; width:74;' height="47">
  <p style="margin-top: 6pt; margin-bottom: 6pt">&nbsp;</td>
  <td valign=top style='border-bottom:1px dotted #000000; width:483;' height="47">
  <p style="margin-top: 6pt; margin-bottom: 6pt"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Pre recorded HSS processing for <br>
  reduced processing cost and hardware<br>
&nbsp;</Font></td>
  </font>
 </tr>
 <tr>
  <Font style='font-size:10.0pt;font-family:Symbol'>

  <td valign=top style='border-bottom:2px solid #000000; width:425;' height="48">
  <p style="margin-top: 6pt; margin-bottom: 6pt"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Dynamic Carrier System for Parametric Arrays</Font></td>
  <td valign=top style='border-bottom:2px solid #000000; width:74;' height="48">
  <p style="margin-top: 6pt; margin-bottom: 6pt">&nbsp;</td>
  <td valign=top style='border-bottom:2px solid #000000; width:483;' height="48">
  <p style="margin-top: 6pt; margin-bottom: 6pt"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Reduced power consumption and increased
<br>
efficiency in HSS<br>
&nbsp;</Font></td>
  </font>
 </tr>
 <tr>
  <Font style='font-size:10.0pt;font-family:Symbol'>

  <td valign=top style='width:425;' height="10">
  <p style="margin-top: 0pt; margin-bottom: 0pt">
  </td>
  <td valign=top style='width:74;' height="10">
  <p style="margin-top: 0pt; margin-bottom: 0pt">
  </td>
  <td valign=top style='width:483;' height="10">
  <p style="margin-top: 0pt; margin-bottom: 0pt">
  </td>
  </font>
 </tr>
</table>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
<br>
The following table lists some of our other key sound patents and patent
applications and the inventions they cover: </Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
<br>
&nbsp;</Font></p>

</font></font><Font style='font-size:10.0pt;'>

<Font style='font-size:10.0pt;'>

<table border=0 cellspacing=0 cellpadding=0 style='mso-cellspacing:0in;
 mso-padding-alt:0in 0in 0in 0in' width="658">
 <tr>
   <Font style='font-size:10.0pt;font-weight:700; layout-grid-mode:line; color:windowtext' face="Times New Roman">
  <td valign=top style='width:425;'>
  <div style="border-top-style: solid; border-top-width: 2; border-bottom-style: solid; border-bottom-width: 1">
    <p style="margin-top: 6pt; margin-bottom: 6pt">Key Patent Title</div>
  </td>
   </font>
   </font><Font style='font-size:10.0pt;font-family:Symbol'>

   <Font style='font-size:10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'>
  <td valign=top style='width:74;'>
  <div style="border-top: 2px solid #000000">
    <p style="margin-top: 6pt; margin-bottom: 6pt">&nbsp;</div>
  </td>
   </font>
   <Font style='font-size:10.0pt;font-weight:700; layout-grid-mode:line; color:windowtext' face="Times New Roman">
  <td valign=top style='width:483;'>
  <div style="border-top-style: solid; border-top-width: 2; border-bottom-style: solid; border-bottom-width: 1">
    <p style="margin-top: 6pt; margin-bottom: 6pt">Coverage</div>
  </td>
   </font>
 </tr>
 </font>
 </font><Font style='font-size:10.0pt;font-family:Symbol'>

 <Font style='font-size:10.0pt;font-family:Symbol'>

 <tr>
  <Font style='font-size:10.0pt;font-family:Symbol'>

  <td valign=top style='border-bottom:1px dotted #000000; width:425;'>
  <p style="margin-top: 6pt; margin-bottom: 6pt"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Single End Planar Magnetic Speaker</Font></td>
  <td valign=top style='border-bottom:1px dotted #000000; width:74;'>
  <p style="margin-top: 6pt; margin-bottom: 6pt">&nbsp;</td>
  <td valign=top style='border-bottom:1px dotted #000000; width:483;'>
  <p style="margin-top: 6pt; margin-bottom: 6pt"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  a) Single Ended, Planar Magnetic loudspeaker w/high<br>
energy magnets<br>
  b) High speed/low cost planar magnetic diaphragm<br>
production<br>
  c) Specialized film for use in planar magnetic
<br>
loudspeakers<br>
&nbsp;</Font></td>
  </font>
 </tr>
 <tr>
  <td valign=top style='border-bottom:1px dotted #000000; width:425;'>
  <p style="margin-top: 6pt; margin-bottom: 6pt">
  <Font style='font-size:10.0pt; font-family:Symbol'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Acoustically Asymmetric Band-Pass Loudspeaker<br>
  </Font><Font style='font-size:10.0pt;font-family:"Times New Roman"'>With
  Multiple Acoustic Filters</Font></font></td>
  <td valign=top style='border-bottom:1px dotted #000000; width:74;'>
  <p style="margin-top: 6pt; margin-bottom: 6pt">&nbsp;</td>
  <td valign=top style='border-bottom:1px dotted #000000; width:483;'>
  <p style="margin-top: 6pt; margin-bottom: 6pt"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  a) Low distortion/High Powered Subwoofer<br>
  b) Increased bandwidth subwoofer<br>
&nbsp;</Font></td>
 </tr>
 <tr>
  <td valign=top style='border-bottom:2px solid #000000; width:425;'>
  <p style="margin-top: 6pt; margin-bottom: 6pt">
  <Font style='font-size:10.0pt; font-family:Symbol'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Dynamic Power Sharing in a Multi-Channel<br>
  </Font><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Sound
  System</Font></font></td>
  <td valign=top style='border-bottom:2px solid #000000; width:74;'>
  <p style="margin-top: 6pt; margin-bottom: 6pt">&nbsp;</td>
  <td valign=top style='border-bottom:2px solid #000000; width:483;'>
  <p style="margin-top: 6pt; margin-bottom: 6pt"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Power/cost savings, increased output in surround<br>
  sound/home theater systems<br>
&nbsp;</Font></td>
 </tr>
</table>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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>

<p align="center"><font size="2" face="Times New Roman">- 12 -</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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.&nbsp;&nbsp;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:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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
or recorded under this agreement in the fiscal years ended September 30, 2004, 2003 or
2002, as these royalties were immaterial and were waived by Mr. Norris. We may owe royalties in
future periods based on actual sales or technology revenues.</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in;font-size:10.0pt;font-family: "Times New Roman"'><b >
<a name="Research and Development">Research and Development</a></b></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>For the fiscal years
ended September 30, 2004, 2003 and 2002 we spent $2,988,784, $2,437,591 and
$3,537,355 respectively, on company-sponsored research and development, and
$0, $55,760 and $84,708, 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>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><b><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
<a name="Executive Officers">Executive Officers</a></Font></b></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;margin-bottom:12.0pt;tab-stops: -1.0in -.5in 3.5in;font-size:10.0pt;font-family:"Times New Roman"'><b><i ><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Elwood G. Norris,</Font></i></b><b> </b>age 66, has been a Director of our company since August 1980.&nbsp;Mr. Norris served as Chief Executive Officer from October 2000 until February 2003. He currently serves as Chairman of the Board, an executive position.&nbsp;&nbsp;He served as President from August 1980 to February 1994.&nbsp;&nbsp;Mr. 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 vari
ous 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.</p>

 <Font style='font-size:10.0pt;font-family:Symbol'>

<Font style='font-size:10.0pt;font-family:Symbol'>

<p align="center"><font size="2" face="Times New Roman">- 13 -</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>

</font>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:"Times New Roman";color:black;'>&nbsp;</p>

</font>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:"Times New Roman";color:black;font-size:10.0pt'><b><i style='mso-bidi-font-style:normal'><Font style='font-size:10.0pt'>Kalani Jones,</Font></i></b> age 42, was appointed President of our company in April 2004.&nbsp;&nbsp;&nbsp;He joined us 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 Corporation, a provider of removable computer storage solutions, and previously held engineering management positions at General Instrument and TRW. From November 2002 until being recruited by the Company, Mr. Jones was a self-employed entrepreneur developing technology based remote monitoring solutions. Mr. Jones obtained an M.S.E.E. degree in Digital Comm
unications and Digital Signal Processing from USC (1988) and a B.S.E.E. in Electrical and Computer Engineering from California State Polytechnic University (1984).</p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:"Times New Roman";color:black;'><Font style='font-size:10.0pt'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:"Times New Roman";color:black;font-size:10.0pt'><b><i style='mso-bidi-font-style:normal'><Font style='font-size:10.0pt'>Michael A. Russell</Font></i></b>, age 58, joined our company in June 2004 as our Chief Financial Officer.&nbsp;&nbsp;From May 2000 until July 2003, he was the Chief Financial Officer of Metallic Power, Inc, a San Diego developer of zinc-air regenerative fuel cells.&nbsp;&nbsp;From November 1998 until February of 2000, he was the Group Vice President of Finance for the Financial Solutions Group of HNC Software, Inc. (acquired by Fair Isaac Corporation in July 2002), a developer of fraud detection software.&nbsp;Mr. Russell obtained an M.B.A. degree (1971) and a B.S.E.E. degree in electrical engineering (1968) from the University of California at Los Angeles (UCLA). </p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:"Times New Roman";color:black;'><Font style='font-size:10.0pt'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;font-size:10.0pt;font-family:"Times New Roman"'><b><i ><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Carl Gruenler,</Font></i></b> age 51, has served as our Vice President of Government and Force Protection Systems Group since July 2003.&nbsp;&nbsp;During the period from November 2003 until June 2004, he assumed the additional responsibilities of Interim Chief Financial Officer. 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 Reserve. He was responsible for identifying and developing new integrated systems for physical security/access control, waterside force protection and mobile computing. Mr. 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 B.S. in Business Administration from Oral Roberts University in (1975).</p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman";
layout-grid-mode:line'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman";
layout-grid-mode:line'>We are currently seeking an individual to serve as the
Vice President of our Business Group.&nbsp;We are actively recruiting qualified candidates at this time.</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-size:10.0pt;font-family:
"Times New Roman"'><a name="Employees">Employees</a></Font></b></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>At September 30, 2004,
we employed a total of 53 people. Of such employees, 15 were in research and
development, 16 were in production, quality assurance and materials control, 11
were in general and administrative and 11 were in marketing, sales and
licensing.&nbsp;&nbsp;We also lease technical
personnel from time to time on an as needed basis and use outside consultants
for various services.&nbsp;&nbsp;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 favorable.</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<b>
<Font style='font-size:10.0pt;font-family:Symbol' size="2">

 <Font style='font-family:"Times New Roman"; font-size:10.0pt'>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-family:"Times New Roman"'>
<a name="item 2">Item
2. Properties.</a></Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-family:"Times New Roman"'>&nbsp;</Font></p>

</font></font></b>

<p style="margin-top: 1; margin-bottom: 1"><Font style='font-family:"Times New Roman"'>
Our executive offices
and our research and development facilities for our Business Group and
Government Group are located at 13114 Evening Creek Drive South, San Diego,
California.&nbsp;&nbsp;In January 2004, we amended
our lease agreement to increase the office, laboratory, production and
warehouse space we occupy to 23,548 square feet and extend the term of the
lease until July&nbsp;31, 2006.&nbsp;&nbsp;In June
2004, we exercised an option in the lease agreement to reduce the space we
occupy to 14,997 square feet. Our current aggregate monthly payments are&nbsp;$17,996, exclusive of utilities and costs.&nbsp;&nbsp;In order to meet our ongoing needs, we may
increase the space we occupy at this facility or seek new facilities during
fiscal 2005.<br>
&nbsp;</font></p>

<p style="margin-top: 1; margin-bottom: 1"><Font style='font-family:"Times New Roman"'>
</p>

<p style="margin-top: 1; margin-bottom: 1"><Font style='font-family:"Times New Roman"'>
We rent on a monthly
basis office space utilized for development and production of our NeoPlanar
technology for our Business Group and Government Group, located at 3170
Research Way, Unit 81, Carson City, Nevada.&nbsp;We occupy approximately 2,200 square feet with a monthly payment of
$1,250 excluding utilities.</font></p>

<p style="margin-top: 1; margin-bottom: 1">&nbsp;</p>

<p style="margin-top: 1; margin-bottom: 1"><Font style='font-family:"Times New Roman"'>
Our East Coast sales
office for the Government Group is located at 1 Main Street, Topsham, Maine. We
currently rent, on a month-to-month basis, 600 square feet of office space with
monthly payments of $919. We believe that we will be seeking additional space
at this location to meet our needs for fiscal 2005.&nbsp;&nbsp;&nbsp;We believe there is adequate availability of office and
development space in the general vicinity to meet our future needs.&nbsp;&nbsp;</font></p>

<Font style='font-size:10.0pt;font-family:Symbol' size="2">

 <Font style='font-family:"Times New Roman"; font-size:10.0pt'>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

 <Font style='font-size:10.0pt;' size="2">

 <Font style='font-size:10.0pt;font-family:Symbol'>

<p align="center"><font size="2" face="Times New Roman">- 14 -</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:"Times New Roman";color:black;'>&nbsp;</p>

</font>

</font>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-family:"Times New Roman"'>
<a name="Item 3. Legal Proceedings">Item
3. Legal Proceedings.</a></Font></b></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-family:"Times New Roman"'>&nbsp;</Font></b></p>

</font></font>

</font></font>

</font>
 <Font size="2">
 <Font style='font-size:10.0pt;'>
 <p style="margin-top: 1; margin-bottom: 1">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
judgment to the effect that a License, Purchase and Marketing Agreement dated
September 28, 2000, which we refer to as 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. The
principals also founded a corporation, eSOUNDideas, Inc., which purported to
assume the contractual obligations of eSOUNDideas. We amended the complaint in
November 2003 to include eSOUNDideas (the general partnership), Mr. Endsley and
Mr. Paschall as defendants. For convenience, the following discussion refers to
eSOUNDideas and eSOUNDideas, Inc. collectively as &#8220;ESI.&#8221; 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.<br>
&nbsp;</p>

 <Font style='font-size:10.0pt;font-family:Symbol'>

 </font>

</font>

 <Font style='font-size:10.0pt; font-family:Symbol'>

<Font style='font-family:"Times New Roman"'>
<p style="margin-top: 1; margin-bottom: 1"><Font style='font-family:"Times New Roman"'>
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. 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. 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.
ESI did not tender a cure within such sixty day period.</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>The
three cases were consolidated upon motion by the defendants and order of the
court. The defendants filed a cross-action in the consolidated action alleging
fraud, breach of contract in connection with the ESI License Agreement and the
options, 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, and violation of California
Business and Professions Code &sect;17200.&nbsp; We filed our answer to the second
amended cross-complaint in August 2004.&nbsp; Discovery is ongoing.&nbsp; Trial
has been set for May 2005.</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>We
intend to vigorously pursue our complaint against the defendants in this case
and to vigorously challenge the defendant&#146;s cross complaint.</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>We
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 we are a party or to which any of our property is subject.</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-family:"Times New Roman"'>
<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></Font></b></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-family:"Times New Roman"'>&nbsp;</Font></b></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>None.</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-family:"Times New Roman"'>&nbsp;</Font></b></p>

<h1  style='margin:0in;text-align:center;font-size:14.0pt;font-family:"Times New Roman";color:black;font-weight:bold;mso-pagination:widow-orphan lines-together'>PART
II</h1>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-family:"Times New Roman"'>
<a name="Item 5. Market for Registrant&#146;s Common Equity, Related Shareholder Matters and Issuers Purchases of Equity Securities.">Item
5. Market for Registrant&#146;s Common Equity, Related Stockholder Matters and
Issuers Purchases of Equity Securities.</a></Font></b></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-size:10.0pt;font-family:
"Times New Roman"'>&nbsp;</Font></b></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-size:10.0pt;font-family:
"Times New Roman"'>Market Information</Font></b></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Our common stock is
traded and quoted on NASDAQ SmallCap Market under the symbol &#8220;ATCO&#8221;. The market
for our common stock has often been sporadic and limited.</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<Font style='font-family:"Times New Roman"; font-size:10.0pt'>
<Font style='font-size:10.0pt;font-family:"Times New Roman"'>

<p align="center"><font size="2" face="Times New Roman">- 15 -</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>

</font></font>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>The following table sets
forth the high and low bid quotations for our common stock for the fiscal years
ended September 30, 2003 and 2004:<br>
&nbsp;</Font></p>



<table border=0 cellspacing=0 cellpadding=0 style='margin-left:5.4pt;
 border-collapse:collapse;mso-padding-alt:0in 5.4pt 0in 5.4pt' width="581">
 <tr>
  <td valign=top style='width:433;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td colspan=2 valign=top style='width:148;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:center;line-height:normal;
  tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Bid
  Quotations</Font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:433;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td valign=top style='width:109;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'><u><Font style='font-size:10.0pt;font-family:"Times New Roman"'>High</Font></u></p>
  </td>
  <td valign=top style='width:39;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'><u><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;Low</Font></u></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:433;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Fiscal Year Ending
  September 30, 2003</Font></p>
  </td>
  <td valign=top style='width:109;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td valign=top style='width:39;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:433;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;First Quarter</Font></p>
  </td>
  <td valign=top style='width:109;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>$4.77</Font></p>
  </td>
  <td valign=top style='width:39;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>$2.87</Font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:433;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Second Quarter</Font></p>
  </td>
  <td valign=top style='width:109;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>$3.99</Font></p>
  </td>
  <td valign=top style='width:39;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>$3.00</Font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:433;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Third Quarter</Font></p>
  </td>
  <td valign=top style='width:109;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>$6.56</Font></p>
  </td>
  <td valign=top style='width:39;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>$3.11</Font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:433;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fourth Quarter</Font></p>
  </td>
  <td valign=top style='width:109;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>$7.65</Font></p>
  </td>
  <td valign=top style='width:39;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>$5.43</Font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:433;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Fiscal Year Ending
  September 30, 2004</Font></p>
  </td>
  <td valign=top style='width:109;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td valign=top style='width:39;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:433;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;First Quarter</Font></p>
  </td>
  <td valign=top style='width:109;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>$6.19</Font></p>
  </td>
  <td valign=top style='width:39;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>$4.01</Font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:433;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Second Quarter</Font></p>
  </td>
  <td valign=top style='width:109;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>$6.07</Font></p>
  </td>
  <td valign=top style='width:39;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>$4.05</Font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:433;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Third Quarter</Font></p>
  </td>
  <td valign=top style='width:109;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>$7.77</Font></p>
  </td>
  <td valign=top style='width:39;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>$5.50</Font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:433;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fourth Quarter</Font></p>
  </td>
  <td valign=top style='width:109;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>$6.70</Font></p>
  </td>
  <td valign=top style='width:39;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Palatino;color:black;line-height:normal;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>$4.38</Font></p>
  </td>
 </tr>
</table>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>The above quotations
reflect inter-dealer prices, without retail markup, markdown or commission and
may not represent actual transactions.</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in;mso-bidi-font-weight:bold'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
We had 1,112 holders of record of our common stock at December <Font style='mso-bidi-font-weight:bold'>
20</Font>, 2004 with 19,808,819 shares issued and outstanding. We have never paid a cash dividend on our common stock or preferred stock and do not expect to pay dividends in the foreseeable future.&nbsp;&nbsp;The terms of our Series D and Series E Preferred Stock require preferred dividends be paid to the holders of such stock in preference to dividends to holders of our common stock.</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

</font></font>

</font>

 <Font style='font-size:10.0pt; ' face="Times New Roman">

<p style="margin-top: 0; margin-bottom: 0"><b>Equity
Compensation Plan Information</b></font></p>

<p style="margin-top: 0; margin-bottom: 0">

 <Font style='font-size:10.0pt; font-family:Symbol'>

<Font style='font-size:10.0pt;font-family:"Times New Roman"'>
At September&nbsp;30, 2004, we had two 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 and the 1997 Stock Option
Plan.&nbsp;&nbsp;These plans have been approved by
our stockholders. In addition, from time to time we issue to employees,
directors and service providers special stock options, inducement grants and
warrants to purchase common shares, and these grants have not been approved by
stockholders. The following table gives information as of September&nbsp;30,
2004:</p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
page-break-after:avoid'>&nbsp;</p>

<table border=1 cellspacing=0 cellpadding=0 style='border-collapse:collapse;
 border:none;mso-border-alt:solid windowtext .5pt;mso-padding-alt:0in 5.4pt 0in 5.4pt' width="638">
 <tr>
  <td valign=top style='width:270;border:medium none;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;mso-pagination:widow-orphan lines-together;
  mso-element:frame;mso-element-frame-hspace:9.0pt;
  mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:paragraph;
  mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;mso-height-rule:
  exactly'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;mso-pagination:widow-orphan lines-together;
  mso-element:frame;mso-element-frame-hspace:9.0pt;
  mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:paragraph;
  mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;mso-height-rule:
  exactly'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;mso-pagination:widow-orphan lines-together;
  mso-element:frame;mso-element-frame-hspace:9.0pt;
  mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:paragraph;
  mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;mso-height-rule:
  exactly'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;mso-pagination:widow-orphan lines-together;
  mso-element:frame;mso-element-frame-hspace:9.0pt;
  mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:paragraph;
  mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;mso-height-rule:
  exactly'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;mso-pagination:widow-orphan lines-together;
  mso-element:frame;mso-element-frame-hspace:9.0pt;
  mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:paragraph;
  mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;mso-height-rule:
  exactly'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>
  <p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
  mso-element:frame;mso-element-frame-hspace:9.0pt;
  mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:paragraph;
  mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;mso-height-rule:
  exactly'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Plan
  Category</Font></p>
  </td>
  <td valign=top style='width:17;border:medium none;'>
  &nbsp;</td>
  <td valign=top style='width:227;border:medium none;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;mso-pagination:widow-orphan lines-together;
  mso-element:frame;mso-element-frame-hspace:9.0pt;
  mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:paragraph;
  mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;mso-height-rule:
  exactly'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;mso-pagination:widow-orphan lines-together;
  mso-element:frame;mso-element-frame-hspace:9.0pt;
  mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:paragraph;
  mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;mso-height-rule:
  exactly'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;mso-pagination:widow-orphan lines-together;
  mso-element:frame;mso-element-frame-hspace:9.0pt;
  mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:paragraph;
  mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;mso-height-rule:
  exactly'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Number
  of securities to be issued upon exercise of outstanding options, warrants and
  rights</Font></p>
  </td>
  <td valign=top style='width:20;border:medium none;'>
  &nbsp;</td>
  <td valign=top style='width:255;border:medium none;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;mso-pagination:widow-orphan lines-together;
  mso-element:frame;mso-element-frame-hspace:9.0pt;
  mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:paragraph;
  mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;mso-height-rule:
  exactly'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;mso-pagination:widow-orphan lines-together;
  mso-element:frame;mso-element-frame-hspace:9.0pt;
  mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:paragraph;
  mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;mso-height-rule:
  exactly'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;mso-pagination:widow-orphan lines-together;
  mso-element:frame;mso-element-frame-hspace:9.0pt;
  mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:paragraph;
  mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;mso-height-rule:
  exactly'><Font style='font-size:10.0pt;font-family:"Times New Roman"'><br>
  Weighted-average
  exercise price of outstanding options, warrants and rights</Font></p>
  </td>
  <td valign=top style='width:16;border:medium none;'>
  &nbsp;</td>
  <td valign=top style='width:239;border:medium none;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;mso-pagination:widow-orphan lines-together;
  mso-element:frame;mso-element-frame-hspace:9.0pt;
  mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:paragraph;
  mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;mso-height-rule:
  exactly'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Number
  of securities remaining available for future issuance under equity
  compensation plans (excluding securities reflected in column (a))</Font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:270;border:medium none;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;mso-element:frame;
  mso-element-frame-hspace:9.0pt;mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:
  paragraph;mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;
  mso-height-rule:exactly'>&nbsp;</p>
  </td>
  <td valign=top style='width:17;border:medium none;'>
  &nbsp;</td>
  <td valign=top style='width:227;border:medium none;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;mso-element:frame;
  mso-element-frame-hspace:9.0pt;mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:
  paragraph;mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;
  mso-height-rule:exactly'><u><Font style='font-size:10.0pt;font-family:"Times New Roman"'>(a)</Font></u></p>
  </td>
  <td valign=top style='width:20;border:medium none;'>
  &nbsp;</td>
  <td valign=top style='width:255;border:medium none;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;mso-element:frame;
  mso-element-frame-hspace:9.0pt;mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:
  paragraph;mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;
  mso-height-rule:exactly'><u><Font style='font-size:10.0pt;font-family:"Times New Roman"'>(b)</Font></u></p>
  </td>
  <td valign=top style='width:16;border:medium none;'>
  &nbsp;</td>
  <td valign=top style='width:239;border:medium none;'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;mso-element:frame;
  mso-element-frame-hspace:9.0pt;mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:
  paragraph;mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;
  mso-height-rule:exactly'><u><Font style='font-size:10.0pt;font-family:"Times New Roman"'>(c)</Font></u></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:270;border:medium none;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-element:frame;mso-element-frame-hspace:9.0pt;
  mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:paragraph;
  mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;mso-height-rule:
  exactly'><Font style='font-size:9.0pt;font-family:
  "Times New Roman"'>&nbsp;</Font></p>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-element:frame;mso-element-frame-hspace:9.0pt;
  mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:paragraph;
  mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;mso-height-rule:
  exactly'><Font style='font-size:9.0pt;font-family:
  "Times New Roman"'>Equity compensation plans approved by security holders</Font></p>
  </td>
  <td valign=top style='width:17;border:medium none;'>
  &nbsp;</td>
  <td valign=top style='width:227;border:medium none;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right;mso-element:frame;
  mso-element-frame-hspace:9.0pt;mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:
  paragraph;mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;
  mso-height-rule:exactly'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right;mso-element:frame;
  mso-element-frame-hspace:9.0pt;mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:
  paragraph;mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;
  mso-height-rule:exactly'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;mso-element:frame;
  mso-element-frame-hspace:9.0pt;mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:
  paragraph;mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;
  mso-height-rule:exactly'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  1,652,498</Font></p>
  </td>
  <td valign=top style='width:20;border:medium none;'>
  &nbsp;</td>
  <td valign=top style='width:255;border:medium none;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right;mso-element:frame;
  mso-element-frame-hspace:9.0pt;mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:
  paragraph;mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;
  mso-height-rule:exactly'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right;mso-element:frame;
  mso-element-frame-hspace:9.0pt;mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:
  paragraph;mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;
  mso-height-rule:exactly'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;mso-element:frame;
  mso-element-frame-hspace:9.0pt;mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:
  paragraph;mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;
  mso-height-rule:exactly'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  $4.59</Font></p>
  </td>
  <td valign=top style='width:16;border:medium none;'>
  &nbsp;</td>
  <td valign=top style='width:239;border:medium none;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right;mso-element:frame;
  mso-element-frame-hspace:9.0pt;mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:
  paragraph;mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;
  mso-height-rule:exactly'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right;mso-element:frame;
  mso-element-frame-hspace:9.0pt;mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:
  paragraph;mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;
  mso-height-rule:exactly'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>
  <p align=center style='margin:0in;font-family:Times;color:black;text-align:center;mso-element:frame;
  mso-element-frame-hspace:9.0pt;mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:
  paragraph;mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;
  mso-height-rule:exactly'><font size="2">284,928</font></p>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;mso-element:frame;
  mso-element-frame-hspace:9.0pt;mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:
  paragraph;mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;
  mso-height-rule:exactly'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:270;border:medium none;'>
  <Font style='font-size:10.0pt;font-family:"Times New Roman"'><Font style='font-size:9.0pt;font-family:
  "Times New Roman"'>Equity compensation plans not approved by security holders</Font></td>
  <td valign=top style='width:17;border:medium none;'>
  &nbsp;</td>
  <td valign=top style='width:227;border:medium none;'>
  <p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-element:frame;mso-element-frame-hspace:9.0pt;
  mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:paragraph;
  mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;mso-height-rule:
  exactly' align="center"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  <br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 337,000<sup> (1)</sup></Font></p>
  </td>
  <td valign=top style='width:20;border:medium none;'>
  &nbsp;</td>
  <td valign=top style='width:255;border:medium none;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right;mso-element:frame;
  mso-element-frame-hspace:9.0pt;mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:
  paragraph;mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;
  mso-height-rule:exactly'>&nbsp;</p>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;mso-element:frame;
  mso-element-frame-hspace:9.0pt;mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:
  paragraph;mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;
  mso-height-rule:exactly'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>$4.84</Font></p>
  </td>
  <td valign=top style='width:16;border:medium none;'>
  &nbsp;</td>
  <td valign=top style='border:medium none; width:239' bordercolor="#FFFFFF">
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center;mso-element:frame;
  mso-element-frame-hspace:9.0pt;mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:
  paragraph;mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;
  mso-height-rule:exactly'>&nbsp;</p>
  <Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  <p align=center style='margin:0in;font-family:Times;color:black;text-align:center;mso-element:frame;
  mso-element-frame-hspace:9.0pt;mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:
  paragraph;mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;
  mso-height-rule:exactly'>--</p>

</font>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:270;border:medium none;'>

  <div style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 3">

  <p align=left style='border-bottom:medium none; margin:0in; font-size:12.0pt;font-family:Times;color:black;mso-border-top-alt:solid windowtext .5pt;
  mso-border-bottom-alt:solid windowtext 2.25pt;padding:0in;mso-padding-alt:
  1.0pt 0in 1.0pt 0in;mso-element:frame;mso-element-frame-hspace:9.0pt;
  mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:paragraph;
  mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;mso-height-rule:
  exactly; border-left-color:inherit; border-right-color:inherit; border-top-color:inherit'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Total</Font></p>

  </div>

  </td>
  <td valign=top style='width:17;border:medium none;'>

  &nbsp;</td>
  <td valign=top style='width:227;border:medium none;'>

  <div style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 3">

  <p align=center style='border-style:none; border-color:inherit; margin:0in; font-family:Times;color:black;text-align:center;mso-border-top-alt:solid windowtext .5pt;mso-border-bottom-alt:solid windowtext 2.25pt;
  padding:0in;mso-padding-alt:1.0pt 0in 1.0pt 0in;mso-element:frame;mso-element-frame-hspace:
  9.0pt;mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:paragraph;
  mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;mso-height-rule:
  exactly'><font size="2">1,989,498</font></p>

  </div>

  </td>
  <td valign=top style='width:20;border:medium none;'>

  &nbsp;</td>
  <td valign=top style='width:255;border:medium none;'>

  <div style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 3">

  <p align=center style='border-bottom:medium none; margin:0in; font-size:12.0pt;font-family:Times;color:black;text-align:center;mso-border-top-alt:solid windowtext .5pt;mso-border-bottom-alt:solid windowtext 2.25pt;
  padding:0in;mso-padding-alt:1.0pt 0in 1.0pt 0in;mso-element:frame;mso-element-frame-hspace:
  9.0pt;mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:paragraph;
  mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;mso-height-rule:
  exactly; border-left-style:none; border-left-color:inherit; border-right-style:none; border-right-color:inherit; border-top-style:none; border-top-color:inherit'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  $4.63</Font></p>

  </div>

  </td>
  <td valign=top style='width:16;border:medium none;'>

  &nbsp;</td>
  <td valign=top style='border:medium none; width:239;'>

  <div style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 3">

  <Font style='font-size:10.0pt;font-family:"Times New Roman"'>

  <p align=center style='border-bottom:medium none; margin:0in; font-family:Times;color:black;text-align:center;mso-border-top-alt:solid windowtext .5pt;mso-border-bottom-alt:solid windowtext 2.25pt;
  padding:0in;mso-padding-alt:1.0pt 0in 1.0pt 0in;mso-element:frame;mso-element-frame-hspace:
  9.0pt;mso-element-wrap:no-wrap-beside;mso-element-anchor-vertical:paragraph;
  mso-element-anchor-horizontal:margin;mso-element-top:-1.5pt;mso-height-rule:
  exactly; border-left-style:none; border-left-color:inherit; border-right-style:none; border-right-color:inherit; border-top-style:none; border-top-color:inherit'>
  284,928</p>

</font>

  </div>

  </td>
 </tr>
</table>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;margin-left:.5in;text-indent:-.25in; tab-stops:list .5in;font-size:10.0pt;font-family:"Times New Roman"'>
<br>
(1)<Font style='font:7.0pt "Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;</Font>Consists of 187,000 of individual stock option grants and 150,000 of warrant grants to employees, directors
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; and service providers approved by the Board of Directors from time to time.</p>

<p>&nbsp;</p>

<p style="margin-top: 1; margin-bottom: 1"><b>Recent Sales of Unregistered Securities</b></p>
<p style="margin-top: 1; margin-bottom: 1">In March 2004, we issued 32,733 shares of common
stock upon conversion of 10,000 shares of our Series E Preferred Stock.&nbsp; We
received no consideration in connection with such issuance.&nbsp; For this issuance,
we relied on the exemption provided by Section 3(a)(9) of the Securities Act.</p>
<p style="margin-top: 1; margin-bottom: 1">&nbsp;</p>
<Font style='font-family:"Times New Roman"; font-size:10.0pt'>
<Font style='font-size:10.0pt;font-family:"Times New Roman"'>

<p align="center"><font size="2" face="Times New Roman">- 16 -</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>

</font></font>
<p style="margin-top: 1; margin-bottom: 1">In April 2004,
we issued 65,856 shares of common stock upon conversion of 20,000 shares of our
Series E Preferred Stock.&nbsp; We received no consideration in connection with such
issuance.&nbsp; For this issuance, we relied on the exemption provided by Section
3(a)(9) of the Securities Act.</p>
<p style="margin-top: 1; margin-bottom: 1">&nbsp;</p>
<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-family:"Times New Roman"'>
<a name="Item 6. Selected Financial Data.">Item
6. Selected Financial Data.</a></Font></b></p>
</font><Font face="Times New Roman" size="2">
<p style="margin-top: 1; margin-bottom: 1">&nbsp;</p>

<Font style='font-size:10.0pt;font-family:"Times New Roman"' size="2">

<p style="margin-top: 1; margin-bottom: 1">The following selected financial data
has been derived from our audited consolidated financial statements and the
related notes. This information should be read in conjunction with Item 7 of
this report - &quot;Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations,&quot; and with our consolidated financial statements and the
related notes set forth at the pages indicated in Item 15(a) of this report.</p>

<p style="margin-top: 1; margin-bottom: 1">&nbsp;</p>

<p style="margin-top: 1; margin-bottom: 1">

 <Font style='font-size:10.0pt; font-family:Symbol' size="2">

<Font style='font-size:10.0pt;font-family:"Times New Roman"' size="2" face="Times New Roman">
<DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For the fiscal years ended September 30,</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%">

<TR>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=middle width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=middle width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2004 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=middle width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2003 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=middle width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2002 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=middle width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2001 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=middle width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Statement of Operations: </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Net revenues </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">5,752,549</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,315,426</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,010,752</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">855,342</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,433,050</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Gross profit (loss) </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2,282,728</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(228,651</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">326,908</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">277,066</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">382,155</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Net loss </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(5,960,436</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(8,227,013</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(8,220,132</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(5,046,219</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(3,068,046</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Net loss available to common stockholders </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(7,325,785</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(10,636,241</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(8,503,044</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(5,166,941</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(7,948,994</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Net loss per share-basic and diluted </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(0.37</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(0.67</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(0.60</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(0.38</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(0.67</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Weighted average number of shares-basic</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;and diluted </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">19,603,265 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">15,857,569 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">14,193,508 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">13,563,101 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">11,868,511 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR></TABLE>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As of September 30,</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%">

<TR>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=middle width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=middle width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2004 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=middle width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2003 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=middle width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2002 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=middle width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2001</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=middle width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Working capital </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">3,472,984</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">8,484,210</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">554,713</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">892,040</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">4,794,743</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Total assets </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">7,645,291</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">11,744,371</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">3,789,634</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">3,837,284</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">7,275,614</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Long-term obligations </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">12,131</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">23,097</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">3,153,012</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">-</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">-</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Total stockholders' equity (deficit) </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">5,192,915</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">9,728,171</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(884,882</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2,993,495</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">6,829,875</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR></TABLE>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>&nbsp;</DIV>
</DIV>
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<a name="Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.">Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations.</a></Font></b></p>

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<p style="margin-top: 1; margin-bottom: 1">This discussion should
be read in conjunction with the information presented in other sections of this
report on Form 10-K, including &#8220;Item 1. Business,&#8221; &#8220;Item 6. Selected Financial
Data,&#8221; and &#8220;Item 8. Financial Statements and Supplementary Data.&#8221; This
discussion contains forward-looking statements which are based on our current
expectations and industry experience, as well as our perception of historical
trends, current market conditions, current economic data, expected future
developments and other factors that we believe are appropriate under the
circumstances. These statements involve risks and uncertainties that could
cause actual results to differ materially from those suggested in the
forward-looking statements. </p>
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<p style="margin-top: 1; margin-bottom: 1">&nbsp;</p>

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<p style="margin-top: 1; margin-bottom: 1">We begin this discussion
with an overview to give you an understanding of our business and the markets
we serve. We then discuss our critical accounting policies. This is followed by
a discussion of our results of operations for the fiscal years ended
September&nbsp;30, 2004, 2003 and 2002. We include in this discussion
additional disclosure regarding our two reportable business segments, the Business
Group and the Government Group. We then discuss our financial condition at
September&nbsp;30, 2004 with a comparison to September&nbsp;30, 2003 and 2002.
This section includes information regarding our liquidity and capital
resources, cash flows, and contractual obligations. Finally, we provide risk
factors at the end of this discussion.</p>
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<p style="margin-top: 1; margin-bottom: 1">&nbsp;</p>

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<p style="margin-top: 1; margin-bottom: 1"><b>Overview</b></p>
<p style='margin:1 0in;font-family:Times;color:black'>We
are an innovator of proprietary sound reproduction technologies and products.
Our HyperSonic Sound, or HSS, technology is a new method of sound reproduction
that creates sound &#8220;in the air.&#8221;&nbsp;&nbsp;Sound
is generated along an air column using ultrasonic frequencies, which are 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.</p>

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<p align="center"><font size="2" face="Times New Roman">- 17 -</font></p>
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<p style="margin-top: 1; margin-bottom: 1">Our
Long Range Acoustic Device, or LRAD, technology produces variable intensity
acoustical sound intended for use in long-range delivery of directional sound
information, which is effectively a supercharged megaphone. LRAD products are
used as directed long-range hailing and warning systems.</p>


<p style="margin-top: 1; margin-bottom: 1">&nbsp;</p>

<p style="margin-top: 1; margin-bottom: 1">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 and public address systems. Our SoundCluster technology is a new
multi-transducer, speaker cluster optimized for even sound coverage over large
areas such as aircraft hangar decks.&nbsp;&nbsp;We
have other proprietary sound technologies and products in various stages of
development.</p>

<p style="margin-top: 1; margin-bottom: 1">&nbsp;</p>

<p style="margin-top: 1; margin-bottom: 1">Our primary products
sold to date have been LRAD and HSS products. These products are currently
manufactured for us by Pemstar, Inc., an established contract manufacturer with
multiple locations worldwide. Our sales have been highly dependent on large
orders from a few customers.&nbsp;&nbsp;We target
our products for sale worldwide, but expect the largest markets to be the U.S., Europe
and Asia. To date, our sales have been made in U.S. dollars and we do not
expect currency fluctuations to have a material impact on our operations. </p>

</font><Font style='font-size:10.0pt;font-family:Symbol'>

 <Font style='font-size:10.0pt; font-family:Symbol'>

<p style="margin-top: 1; margin-bottom: 1">&nbsp;</p>

<Font style='font-size:10.0pt;' face="Times New Roman">

<p style="margin-top: 1; margin-bottom: 1">Fiscal 2004 was a good
year for our company. We successfully introduced new products, transitioned to
contract manufacturing to allow for increased production capacity and achieved
record revenues. Our Government Group established LRAD as an important new
product for protection in defense and homeland security. To date, we have
incurred operating losses, as we have not yet achieved revenues sufficient to
support our significant expenditures on research and development and our
growing sales and administrative support services.</p>

<p style="margin-top: 1; margin-bottom: 1">&nbsp;</p>

<p style="margin-top: 1; margin-bottom: 1">Our various technologies
are high risk in nature. Our future is largely dependent upon the success of
our proprietary 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,
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. See &#8220;Risk Factors&#8221; below.</p>

<p style="margin-top: 1; margin-bottom: 1">&nbsp;</p>

<p style="margin-top: 1; margin-bottom: 1">  </font><Font style='font-size:10.0pt; font-family:Symbol'><Font style='font-size:10.0pt;' face="Times New Roman">
We incurred net losses of
$5,960,436, $8,227,013, and $8,220,132 in the fiscal years ended September 30,
2004, 2003 and 2002.&nbsp; We have substantial research and development and selling,
marketing and general administrative expenses, and our margins from the sale of
our products have not yet been sufficient to offset these costs.&nbsp; We may incur
additional operating losses during fiscal 2005, and we may need additional
operating funds to support our growth.&nbsp; See &#147;Liquidity and Capital Resources&#148;
below. Based on our current plan and without drawing any additional funds from
the CEFF described below, we anticipate that we will be able to meet our cash requirements for
the next twelve months.&nbsp; We have significant flexibility to adjust the level of
research and development and selling and administrative expenses based on the
availability of resources.&nbsp; However, reductions in expenditures could delay
development and adversely affect our ability to generate future revenues.&nbsp; </p>

</font>

<p style='margin:1 0in;font-size:12.0pt;font-family:Times;color:black'> &nbsp;</p>

<p style='margin:1 0in;font-size:12.0pt;font-family:Times;color:black'> <Font style='font-size:10.0pt;font-family: "Times New Roman";color:windowtext'>
<b>Recent Developments</b></font></p>

</font></font></font><Font face="Times New Roman">

<p style='margin:1 0in;font-family:Times;color:black'>
In December 2004, we received a firm
order for $4.5 million in LRAD products from ADS, Inc. for use by the U.S. Army
3rd Infantry Division, Fort Stewart, Georgia.&nbsp; The order also includes $0.4
million in ancillary products which we are providing on a value-added reseller
basis along with the LRAD units.&nbsp; The order calls for deliveries in December
2004 and January 2005 and customary payment terms.&nbsp; We expect to recognize
approximately 65% of the revenue for this order during the first quarter of
fiscal 2005 and the balance during the second quarter of fiscal 2005.<br>
&nbsp;</p>

</font><Font style='font-family:Symbol'>

</font><Font face="Times New Roman">

<p style="margin-top: 1; margin-bottom: 1">In December 2004, we sold for cash in a private
offering an aggregate of $2,000,000 of unsecured subordinated promissory notes
due December 31, 2006.&nbsp; In connection with the financing, we also issued
five-year warrants to purchase an aggregate of 150,000 shares, 75,000 of which
have an exercise price of $9.28 per share, and 75,000 of which have an exercise
price of $8.60 per share.&nbsp; A trust affiliated with Elwood G. Norris, our
Chairman and the beneficial owner of 19.5% of our common stock before the
financing, purchased a note in the principal amount of $500,000 and received a
warrant exercisable for 37,500 shares with an exercise price of $9.28 per
share.&nbsp; For more information on this financing, see &#147;Liquidity and Capital
Resources&#150;Financing Activities&#148; below.</p>
<p class="Normal" style="margin-top: 0; margin-bottom: 0">
&nbsp;</p>
<p style="margin-top: 0; margin-bottom: 0">
In December 2004,
we entered into a Committed Equity Financing Facility (CEFF) with Kingsbridge
Capital Ltd., pursuant to which Kingsbridge committed, subject to certain
significant limiting conditions, to purchase up to
$25,000,000 of our common stock, subject to various conditions, at a price that
is between 88% and 92% of the volume weighted average price during a 15 day
purchase period.&nbsp; We are obligated to use 40% of the proceeds we may receive
from the CEFF to prepay any outstanding interest and principal on the notes sold
in December 2004.&nbsp; We believe the CEFF will offer us flexibility to raise
capital to support our growth as required, at the time, price and in the amounts
deemed suitable to us.&nbsp; For more information on the CEFF, see &#147;Liquidity and
Capital Resources&#148; and &#147;Risk Factors&#148; below.</p>

<p style="margin-top: 1; margin-bottom: 1">&nbsp;</p>

<Font style='font-family:"Times New Roman"; font-size:10.0pt'>
<Font style='font-size:10.0pt; font-family:Symbol'>

  <Font style='font-family:Symbol'>

<Font style='font-size:10.0pt;font-family:"Times New Roman"'>

<p align="center"><font size="2" face="Times New Roman">- 18 -</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
</font>

<p style='margin:1 0in;font-size:12.0pt;font-family:Times;color:black'>&nbsp;</p>

</font></font>


 </font>

</font>

</font></font>

 <Font style='font-size:10.0pt; ' face="Times New Roman">

</font>

 <Font style='font-size:10.0pt; font-family:Symbol'>

 <Font style='font-family:Symbol'>

<p style='margin:1 0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:
..5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
><Font style='font-size:10.0pt;font-family:
"Times New Roman"'>Business Outlook</Font></b></p>

</font><Font face="Times New Roman">

<p style="margin-top: 1; margin-bottom: 1">We produced record
revenues for the fiscal year ended September 30, 2004 while reducing our
operating losses. In fiscal 2005, we believe revenues will continue to grow
primarily due to increased acceptance of our LRAD and other Government Group
products and from anticipated growth in HSS product sales. We also expect other
products such as NeoPlanar and SoundCluster products will support growth in
fiscal 2005. We expect our expenditure levels for research and development and
for selling, general and administrative purposes to increase as revenues grow.
We are aggressively developing new versions of existing products and new
products based on our proprietary sound technologies to support future growth.</p>

</font><Font style='font-family:Symbol'>

<p style="margin-top: 1; margin-bottom: 1">&nbsp;</p>
<Font face="Times New Roman">

<p style="margin-top: 1; margin-bottom: 1">We believe the success
of our LRAD product, growing HSS product shipments and our significant
investment in new technologies and new products provide a solid foundation for
business growth over the next several years.&nbsp;We also believe that LRAD, NeoPlanar and SoundCluster are positioned for
significant long term contract awards in military, government and commercial
markets during fiscal 2005.</p>

</font>
<p style="margin-top: 1; margin-bottom: 1">&nbsp;</p>
<Font face="Times New Roman">

<p style="margin-top: 1; margin-bottom: 1"><b>Critical Accounting Policies and Estimates</b></p>
<p style="margin-top: 1; margin-bottom: 1">We have identified the
policies below as critical to our business operations and the understandings of
our results of operations. Our accounting policies are more fully described in
our financial statements located in Item 8 of Part II, &#8220;Financial Statements
and Supplementary Data.&#8221; 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.</p>

</font>
<p style="margin-top: 1; margin-bottom: 1">&nbsp;</p>
<Font face="Times New Roman">

<p style="margin-top: 1; margin-bottom: 1">The methods, estimates
and judgments we use in applying our accounting policies, in conformity with
generally accepted accounting principles in the United States, have a
significant impact on the results we report in our financial statements. We
base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances. The estimates affect the
carrying values of assets and liabilities. Actual results may differ from these
estimates under different assumptions or 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.</p>

</font>
<p style="margin-top: 1; margin-bottom: 1">&nbsp;</p>
<Font face="Times New Roman">

<p style="margin-top: 1; margin-bottom: 1"><i>Revenue Recognition.</i> &nbsp;We currently derive our revenue primarily from two sources: (i) component and product sale revenues and associated engineering and installation, which we refer to collectively as Product Sales and (ii) contract and license fee revenue. &nbsp;Product Sales revenues are recognized in the periods that products are shipped to customers, FOB shipping point or destination, per contract, 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 engineering contracts are recognized based on milestones or completion of the contracted services. 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 generally recognized ratably over the specified term of the particular license or agreement.</p>

</font>
<p style="margin-top: 1; margin-bottom: 1">&nbsp;</p>
<Font face="Times New Roman">

<p style="margin-top: 1; margin-bottom: 1"><i>Valuation of Intangible Assets.</i>&nbsp;&nbsp;Intangible assets include purchased technology and patents, which are amortized over their estimated useful lives. We must make judgments and estimates regarding the future utility and carrying value of intangible assets. The carrying values 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.&nbsp;&nbsp;In fiscal 2004, we reviewed the carrying value of our intangible assets and reduced the carrying value of these assets. Our judgments and estimates regarding carrying value and impairment of intangible assets have an impact on our financial statements. </p>

</font>
<p style="margin-top: 1; margin-bottom: 1">&nbsp;</p>
<Font face="Times New Roman">

<p style="margin-top: 1; margin-bottom: 1"><i>Warranty Reserve.</i> We establish a warranty reserve based on anticipated warranty claims at the time
product revenue is recognized. These warranties require us to make estimates
regarding the amount and costs of warranty repairs we expect to
make over a period of time. 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 8 to our financial statements for additional information
regarding warranties. The estimates we use have an impact on our financial
statements.</p>

</font>

</font><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>

</font>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in;font-size:10.0pt; font-family:"Times New Roman";font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in;font-size:10.0pt;font-family:"Times New Roman"'><i style='mso-bidi-font-style:normal'>Guarantees and Indemnifications</i>.&nbsp;&nbsp;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.
We have no liabilities recorded for such indemnities. This estimate has an impact on our financial statements.</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>
<p align="center"><font size="2" face="Times New Roman">- 19 -</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in;font-size:10.0pt; font-family:"Times New Roman"'><i style='mso-bidi-font-style:normal'>Deferred Tax Asset. </i>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. Congress passed the American Jobs
Creation Act of 2004 in October 2004.&nbsp; The new law contains
numerous changes to existing tax laws, including both domestic and foreign tax
incentives.&nbsp; We have not yet determined what impact, if any, this new law may
have on our deferred tax asset, or our future results of operations and
financial condition.</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in;font-size:10.0pt; font-family:"Times New Roman";mso-bidi-font-style:italic'><i style='mso-bidi-font-style:normal'>Legal
Proceedings.</i>&nbsp;&nbsp;We are currently involved in certain legal proceedings.&nbsp;&nbsp;Although unfavorable outcomes in any of these matters
could have a material adverse effect on our operating results, liquidity or financial position, we believe the claims are without merit and intend to vigorously defend the actions. We estimate the range of liability relating to pending litigation, where the amount and range of loss can be estimated.&nbsp;&nbsp;We record our best estimate of a loss when the loss is considered probable.&nbsp;&nbsp;Where a liability is probable and there is a range of estimated loss with no best estimate in the range, we record the minimum estimated liability related to the claim.&nbsp;&nbsp;As additional information becomes available, we assess the potential liability related to our pending litigation and revise our estimates.&nbsp;&nbsp;We have recorded an accrual of $150,000 for contingent liability associated with our legal proceedings.&nbsp;&nbsp;Revisions in our estimates of the potential liability could materially impact our results of operations.</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman";mso-bidi-font-style:italic'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in;font-size:10.0pt;font-family:"Times New Roman";mso-bidi-font-style:italic'><i>Valuation of Inventory. </i>Our inventory is comprised of raw materials, assemblies and finished products that we intend to sell to our<i> </i>customers<i>. </i>We<i> </i>
must periodically make judgments and estimates regarding the future utility and
carrying value of our inventory.&nbsp;&nbsp;The carrying value of our inventory is
periodically reviewed and impairments, if any, are recognized when the expected
future benefit from our inventory is less than its carrying value.&nbsp;&nbsp;In fiscal 2004 we reviewed the carrying value of our inventory and increased the reserve for obsolescence by $90,000 for raw materials that were used on our HSS Generation II products but are not required for our HSS Generation III products.</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman";mso-bidi-font-style:italic'>&nbsp;</Font></p>

</font><Font style='color:windowtext' face="Times New Roman" size="2">

<p style='margin:0in;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><b
>Results of Operations</b></p>

<p style='margin:1 0in;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

</font>
<Font style='font-size:10.0pt; color:windowtext' face="Times New Roman" size="2">

<p style="margin-top: 1; margin-bottom: 1"><b><i>Revenues</i></b></p>
<p style="margin-top: 1; margin-bottom: 1">Revenues
increased 337% in fiscal 2004 to $5,752,549 compared to $1,315,426 for fiscal
2003. Fiscal 2003 revenues were 30% higher than fiscal 2002 revenues of
$1,010,752. Fiscal 2004 revenues included $5,581,936 of product sales and
$170,613 of contract and license revenues. 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.</p>
<p style="margin-top: 1; margin-bottom: 1">&nbsp;</p>

<p style="margin-top: 1; margin-bottom: 1">During
fiscal 2002, we recorded revenues of $305,208 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 proprietary 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
and all of fiscal 2004 revenues.</p>
<p style="margin-top: 1; margin-bottom: 1">&nbsp;</p>
<p style="margin-top: 1; margin-bottom: 1">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 and NeoPlanar
speakers to companies which employ audio in consumer, commercial and
professional applications. Our Government and Force Protection Systems Group
(Government Group) markets LRAD, NeoPlanar, SoundCluster and HSS products to
government and military customers and to the expanding force protection and
commercial security markets. 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.</p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Presented
below is a summary of revenues by business segment:</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

</font><Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">

<table border=0 cellspacing=0 cellpadding=0 width=577 style='width:433.0pt;
 border-collapse:collapse;mso-padding-alt:0in 0in 0in 0in'>
 <tr style='height:12.75pt'>
  <td width=191 nowrap valign=bottom style='width:143.0pt;border:none;
  border-bottom:solid windowtext .5pt;height:12.75pt'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt'>
  <b>Years Ended September
  30,&nbsp;</b>&nbsp;</Font></p>
  </td>
  <td width=64 nowrap valign=bottom style='width:48.35pt;border:none;
  border-bottom:solid windowtext .5pt;height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt'>&nbsp;</Font></p>
  </td>
  <td width=85 colspan=2 valign=bottom style='width:63.65pt;border:none;
  border-bottom:solid windowtext .5pt;height:12.75pt'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center'>
  <Font style='font-size:10.0pt; font-weight:700'>2004 </Font></p>
  </td>
  </font><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>
  <td width=37 colspan=2 valign=bottom style='width:27.9pt;border:none;border-bottom:
  solid windowtext .5pt;height:12.75pt'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center'>&nbsp;</p>
  </td>
  <Font style='font-size:10.0pt; color:windowtext'>
  <td width=90 colspan=3 valign=bottom style='width:67.4pt;border:none;border-bottom:
  solid windowtext .5pt;height:12.75pt'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center'>
  <Font style='font-size:10.0pt; font-weight:700' face="Times New Roman">2003 </Font></p>
  </td>
  </font>
  <td width=24 colspan=2 valign=bottom style='width:17.95pt;border:none;
  border-bottom:solid windowtext .5pt;height:12.75pt'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center'>&nbsp;</p>
  </td>
  <Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">
  <td width=85 nowrap colspan=2 valign=bottom style='width:63.75pt;border:none;
  border-bottom:solid windowtext .5pt;height:12.75pt'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center'>
  <Font style='font-size:10.0pt; font-weight:700'>2002 </Font></p>
  </td>
  <td width=1 valign=bottom style='width:1.0pt;border:none;border-bottom:solid windowtext .5pt;
  height:12.75pt'>
  <p align=center style='margin:0in;font-family:Times;color:black;text-align:center'>
  <font size="2">&nbsp;</font></p>
  </td>
 </tr>
 </font><Font style='font-size:10.0pt; color:windowtext'>
 <tr style='height:12.75pt;mso-row-margin-right:1.0pt'>
  <td width=191 nowrap valign=bottom style='width:143.0pt;
  height:12.75pt'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>
  <Font style='font-size:10.0pt' face="Times New Roman">&nbsp;Revenues: </Font></p>
  </td>
  </font><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>
  <td width=64 nowrap valign=bottom style='width:48.35pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=10 valign=top style='width:7.8pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=74 nowrap valign=bottom style='width:55.85pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=36 valign=top style='width:26.85pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=10 colspan=2 valign=top style='width:7.55pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=80 valign=top style='width:59.9pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=8 colspan=2 valign=top style='width:6.2pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=23 nowrap colspan=2 valign=bottom style='width:17.55pt;height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=79 nowrap valign=bottom style='width:58.95pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <Font style='font-size:10.0pt; color:windowtext' face="Times New Roman" size="2">
  <td style='mso-cell-special:placeholder;border:none;'
  width=1>
<p align=right style='margin:0in;font-family:Times;color:black'>&nbsp;</td>
 </tr>
 </font><Font style='font-size:10.0pt; color:windowtext'>
 <tr style='height:12.75pt;mso-row-margin-right:1.0pt'>
  <td width=191 nowrap valign=bottom style='width:143.0pt;
  height:12.75pt'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-indent:2.4pt;mso-char-indent-count:1.0;
  mso-char-indent-size:2.4pt'>
  <Font style='font-size:10.0pt' face="Times New Roman">&nbsp;&nbsp;&nbsp; Business Group </Font></p>
  </td>
  </font><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>
  <td width=64 nowrap valign=bottom style='width:48.35pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">
  <td width=10 valign=bottom style='width:7.8pt;
  height:12.75pt' align="left">
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt'>$</Font></p>
  </td>
  <td width=74 nowrap valign=bottom style='width:55.85pt;
  height:12.75pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>933,373 </Font></p>
  </td>
  </font>
  <td width=36 valign=top style='width:26.85pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">
  <td width=10 colspan=2 valign=bottom style='width:7.55pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt'>$</Font></p>
  </td>
  <td width=80 valign=bottom style='width:59.9pt;
  height:12.75pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>861,091 </Font></p>
  </td>
  </font>
  <td width=8 colspan=2 valign=top style='width:6.2pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">
  <td width=23 nowrap colspan=2 valign=bottom style='width:17.55pt;height:12.75pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>$</Font></p>
  </td>
  <td width=79 nowrap valign=bottom style='width:58.95pt;
  height:12.75pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>922,542 </Font></p>
  </td>
  <td style='mso-cell-special:placeholder;border:none;'
  width=1>
<p align=right style='margin:0in;font-family:Times;color:black'><font size="2">&nbsp;</font></td>
 </tr>
 </font><Font style='font-size:10.0pt; color:windowtext'>
 <tr style='height:12.75pt;mso-row-margin-right:1.0pt'>
  <td width=191 nowrap valign=bottom style='width:143.0pt;
  height:12.75pt'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-indent:2.4pt;mso-char-indent-count:1.0;
  mso-char-indent-size:2.4pt'>
  <Font style='font-size:10.0pt' face="Times New Roman">&nbsp;&nbsp;&nbsp; Government Group </Font></p>
  </td>
  </font><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>
  <td width=64 nowrap valign=bottom style='width:48.35pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=10 valign=bottom style='width:7.8pt;
  height:12.75pt' align="left">
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <Font style='font-size:10.0pt; color:windowtext'>
  <td width=74 nowrap valign=bottom style='width:55.85pt;
  height:12.75pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>
  <Font style='font-size:10.0pt' face="Times New Roman">4,819,176 </Font></p>
  </td>
  </font>
  <td width=36 valign=top style='width:26.85pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=10 colspan=2 valign=bottom style='width:7.55pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <Font style='font-size:10.0pt; color:windowtext'>
  <td width=80 valign=bottom style='width:59.9pt;
  height:12.75pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>
  <Font style='font-size:10.0pt' face="Times New Roman">454,335 </Font></p>
  </td>
  </font>
  <td width=8 colspan=2 valign=top style='width:6.2pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=23 nowrap colspan=2 valign=bottom style='width:17.55pt;height:12.75pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">
  <td width=79 nowrap valign=bottom style='width:58.95pt;
  height:12.75pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>88,210 </Font></p>
  </td>
  <td style='mso-cell-special:placeholder;border:none;'
  width=1>
<p align=right style='margin:0in;font-family:Times;color:black'><font size="2">&nbsp;</font></td>
 </tr>
 </font>
 <tr style='height:13.5pt;mso-row-margin-right:1.0pt'>
  <td width=191 nowrap valign=bottom style='width:143.0pt;
  height:13.5pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=64 nowrap valign=bottom style='width:48.35pt;
  height:13.5pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">
  <td width=10 valign=bottom style='width:7.8pt;border-top:solid windowtext .5pt;
  border-left:none;border-bottom:double windowtext 2.25pt;border-right:none;
  height:13.5pt' align="left">
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt'>$</Font></p>
  </td>
  <td width=74 nowrap valign=bottom style='width:55.85pt;border-top:solid windowtext .5pt;
  border-left:none;border-bottom:double windowtext 2.25pt;border-right:none;
  height:13.5pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>5,752,549 </Font></p>
  </td>
  </font>
  <td width=36 valign=top style='width:26.85pt;border-top:solid windowtext .5pt;
  border-left:none;border-bottom:double windowtext 2.25pt;border-right:none;
  height:13.5pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">
  <td width=10 colspan=2 valign=bottom style='width:7.55pt;border-top:solid windowtext .5pt;
  border-left:none;border-bottom:double windowtext 2.25pt;border-right:none;
  height:13.5pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt'>$</Font></p>
  </td>
  <td width=80 valign=bottom style='width:59.9pt;border-top:solid windowtext .5pt;
  border-left:none;border-bottom:double windowtext 2.25pt;border-right:none;
  height:13.5pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>1,315,426 </Font></p>
  </td>
  </font>
  <td width=8 colspan=2 valign=top style='width:6.2pt;border-top:solid windowtext .5pt;
  border-left:none;border-bottom:double windowtext 2.25pt;border-right:none;
  height:13.5pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">
  <td width=23 nowrap colspan=2 valign=bottom style='width:17.55pt;border-top:
  solid windowtext .5pt;border-left:none;border-bottom:double windowtext 2.25pt;
  border-right:none;height:13.5pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>$</Font></p>
  </td>
  <td width=79 nowrap valign=bottom style='width:58.95pt;border-top:solid windowtext .5pt;
  border-left:none;border-bottom:double windowtext 2.25pt;border-right:none;
  height:13.5pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>1,010,752 </Font></p>
  </td>
  <td style='mso-cell-special:placeholder;border:none;'
  width=1>
<p align=right style='margin:0in;font-family:Times;color:black'><font size="2">&nbsp;</font></td>
 </tr>
 </font>
 <tr style='height:13.5pt;mso-row-margin-right:1.0pt'>
  <td width=191 nowrap valign=bottom style='width:143.0pt;
  height:13.5pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=64 nowrap valign=bottom style='width:48.35pt;
  height:13.5pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=10 valign=top style='width:7.8pt;
  height:13.5pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=74 nowrap valign=bottom style='width:55.85pt;
  height:13.5pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=36 valign=top style='width:26.85pt;
  height:13.5pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=10 colspan=2 valign=top style='width:7.55pt;
  height:13.5pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=80 valign=top style='width:59.9pt;
  height:13.5pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=8 colspan=2 valign=top style='width:6.2pt;
  height:13.5pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=23 nowrap colspan=2 valign=bottom style='width:17.55pt;height:13.5pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=79 nowrap valign=bottom style='width:58.95pt;
  height:13.5pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <Font style='font-size:10.0pt; color:windowtext' face="Times New Roman" size="2">
  <td style='mso-cell-special:placeholder;border:none;'
  width=1>
<p align=right style='margin:0in;font-family:Times;color:black'>&nbsp;</td>
 </tr>

 </font>

</table>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>

<Font style='font-family:"Times New Roman"; font-size:10.0pt'>
<Font style='font-size:10.0pt; color:windowtext; font-family:Symbol' face="Times New Roman" size="2">

<Font style='font-size:10.0pt;font-family:"Times New Roman"'>

</font>

</font></font>
<p align="center"><font size="2" face="Times New Roman">- 20 -</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;font-size:10.0pt;font-family:"Times New Roman"'><i ><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Business Group</Font></i> - The Business Group reported net revenues of $933,373 in fiscal 2004, representing an 8% increase from net revenues of $861,091 in fiscal 2003. The fiscal 2003 net revenues represented a 7% decrease from net revenues of $922,542 in fiscal 2002. Sound product revenues were $933,373 in fiscal 2004, and there were no consumer portable product sales. Sound product revenues were $594,703 in fiscal 2003, consumer portable product sales were $95,730 and contract and licensing revenues were $170,658. The increase in sound product revenues in fiscal 2004 was primarily the result of increased HSS sales offset in part by reduced NeoPlanar sales in the personal boating market.&nbsp;&nbsp;During most of fiscal 2004, we were developing and testing our new HSS Generation III product line and HSS sales were l
imited to certain older systems. We only recently began shipping HSS Generation III systems manufactured by our contract manufacturer to existing and new customers. Accordingly, we expect increased Business Group HSS revenues in fiscal 2005.</p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>

<p style='font-size:12.0pt;font-family:Times;color:black;margin-top:0pt;margin-right:0in;margin-bottom:5.0pt; margin-left:0in;mso-layout-grid-align:none;text-autospace:none;font-size:10.0pt; font-family:"Times New Roman"'><i ><Font style='font-size:10.0pt;font-family: "Times New Roman"'>Government Group</Font></i> &#150; Government Group net revenues for fiscal 2004 were $4,819,176 compared to $454,335 in fiscal 2003, a 961% increase.&nbsp;&nbsp;Net revenues for fiscal 2003 were $454,335 compared to $88,210 in fiscal 2002, a 415% increase. Fiscal 2004 revenues included LRAD revenues of $3,907,291, NeoPlanar revenues of $265,520, SoundCluster revenues of $484,827 and contract fees and other fees of $161,538.&nbsp;&nbsp;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 fiscal 2002 and contract fees and other were
$2,361.&nbsp;&nbsp;The increase in LRAD revenues in fiscal 2004 was primarily the result of increased customer knowledge of the capabilities of LRAD products and their acceptance of the product.&nbsp;&nbsp;Our marketing efforts, successful product deployments and extensive product demonstrations have contributed to customer acceptance of the force protection capabilities of LRAD.&nbsp;&nbsp;We expect LRAD revenues to continue to grow in fiscal 2005 as market awareness
increases and as we improve the product and introduce multiple versions with optional feature sets.</p>

</font></font></font></font>
<Font style='color:windowtext' face="Times New Roman" size="2">

<p style='margin:0in;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>
<b><i><br>
Gross Profit</i></b></p>

<Font style='font-size:10.0pt; color:windowtext' size="2">

<p style='margin:0in;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>Gross profit for fiscal
2004 was $2,282,728 or 40% of revenues, compared to a gross loss on revenues
for fiscal 2003 of $228,651. The
gross loss in fiscal 2003 was principally the result of our $319,500 for special warranty reserve for HSS Generation I
units. We had a gross profit in fiscal 2002 of $326,908 or 32% of revenues.</p>

<p style='margin:0in;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

<p style='margin:0in;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>Presented below is the
gross profit or loss by business segment.</p>

</font></font><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>

</font><Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">

<table border=0 cellspacing=0 cellpadding=0 width=577 style='width:433.0pt;
 border-collapse:collapse;mso-padding-alt:0in 0in 0in 0in'>
 <tr style='height:12.75pt'>
  <td width=191 nowrap valign=bottom style='width:143.0pt;border:none;
  border-bottom:solid windowtext .5pt;height:12.75pt'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt'>
  <b>Years Ended September
  30,&nbsp;</b>&nbsp;</Font></p>
  </td>
  <td width=64 nowrap valign=bottom style='width:48.35pt;border:none;
  border-bottom:solid windowtext .5pt;height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt'>&nbsp;</Font></p>
  </td>
  <td width=85 colspan=2 valign=bottom style='width:63.65pt;border:none;
  border-bottom:solid windowtext .5pt;height:12.75pt'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center'>
  <Font style='font-size:10.0pt; font-weight:700'>2004 </Font></p>
  </td>
  </font><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>
  <td width=37 colspan=2 valign=bottom style='width:27.9pt;border:none;border-bottom:
  solid windowtext .5pt;height:12.75pt'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center'>&nbsp;</p>
  </td>
  <Font style='font-size:10.0pt; color:windowtext'>
  <td width=90 colspan=3 valign=bottom style='width:67.4pt;border:none;border-bottom:
  solid windowtext .5pt;height:12.75pt'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center'>
  <Font style='font-size:10.0pt; font-weight:700' face="Times New Roman">2003 </Font></p>
  </td>
  </font>
  <td width=24 colspan=2 valign=bottom style='width:17.95pt;border:none;
  border-bottom:solid windowtext .5pt;height:12.75pt'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center'>&nbsp;</p>
  </td>
  <Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">
  <td width=85 nowrap colspan=2 valign=bottom style='width:63.75pt;border:none;
  border-bottom:solid windowtext .5pt;height:12.75pt'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center'>
  <Font style='font-size:10.0pt; font-weight:700'>2002 </Font></p>
  </td>
  <td width=1 valign=bottom style='width:1.0pt;border:none;border-bottom:solid windowtext .5pt;
  height:12.75pt'>
  <p align=center style='margin:0in;font-family:Times;color:black;text-align:center'>
  <font size="2">&nbsp;</font></p>
  </td>
 </tr>
 </font><Font style='font-size:10.0pt; color:windowtext'>
 <tr style='height:12.75pt;mso-row-margin-right:1.0pt'>
  <td width=191 nowrap valign=bottom style='width:143.0pt;
  height:12.75pt'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>
  <Font style='font-size:10.0pt' face="Times New Roman">&nbsp;Gross Profit (Loss):</Font></p>
  </td>
  </font><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>
  <td width=64 nowrap valign=bottom style='width:48.35pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=10 valign=top style='width:7.8pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=74 nowrap valign=bottom style='width:55.85pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=36 valign=top style='width:26.85pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=10 colspan=2 valign=top style='width:7.55pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=80 valign=top style='width:59.9pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=8 colspan=2 valign=top style='width:6.2pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=23 nowrap colspan=2 valign=bottom style='width:17.55pt;height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=79 nowrap valign=bottom style='width:58.95pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <Font style='font-size:10.0pt; color:windowtext' face="Times New Roman" size="2">
  <td style='mso-cell-special:placeholder;border:none;'
  width=1>
<p align=right style='margin:0in;font-family:Times;color:black'>&nbsp;</td>
 </tr>
 </font><Font style='font-size:10.0pt; color:windowtext'>
 <tr style='height:12.75pt;mso-row-margin-right:1.0pt'>
  <td width=191 nowrap valign=bottom style='width:143.0pt;
  height:12.75pt'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-indent:2.4pt;mso-char-indent-count:1.0;
  mso-char-indent-size:2.4pt'>
  <Font style='font-size:10.0pt' face="Times New Roman">&nbsp;&nbsp;&nbsp; Business Group </Font></p>
  </td>
  </font><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>
  <td width=64 nowrap valign=bottom style='width:48.35pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">
  <td width=10 valign=bottom style='width:7.8pt;
  height:12.75pt' align="left">
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt'>$</Font></p>
  </td>
  <td width=74 nowrap valign=bottom style='width:55.85pt;
  height:12.75pt'>
  <p align="right" style="font-family: Times; color: black; margin: 0in">
  (534,174)</td>
  </font>
  <td width=36 valign=top style='width:26.85pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">
  <td width=10 colspan=2 valign=bottom style='width:7.55pt;
  height:12.75pt'>
  <p align="right" style="font-family: Times; color: black; margin: 0in">$</td>
  <td width=80 valign=bottom style='width:59.9pt;
  height:12.75pt'>
  <p align="right" style="font-family: Times; color: black; margin: 0in">
  (501,748)</td>
  </font>
  <td width=8 colspan=2 valign=top style='width:6.2pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">
  <td width=23 nowrap colspan=2 valign=bottom style='width:17.55pt;height:12.75pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>$</Font></p>
  </td>
  <td width=79 nowrap valign=bottom style='width:58.95pt;
  height:12.75pt'>
  <p align="right" style="font-family: Times; color: black; margin: 0in">256,779</td>
  <td style='mso-cell-special:placeholder;border:none;'
  width=1>
<p align=right style='margin:0in;font-family:Times;color:black'><font size="2">&nbsp;</font></td>
 </tr>
 </font><Font style='font-size:10.0pt; color:windowtext'>
 <tr style='height:12.75pt;mso-row-margin-right:1.0pt'>
  <td width=191 nowrap valign=bottom style='width:143.0pt;
  height:12.75pt'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-indent:2.4pt;mso-char-indent-count:1.0;
  mso-char-indent-size:2.4pt'>
  <Font style='font-size:10.0pt' face="Times New Roman">&nbsp;&nbsp;&nbsp; Government Group </Font></p>
  </td>
  </font><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>
  <td width=64 nowrap valign=bottom style='width:48.35pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=10 valign=bottom style='width:7.8pt;
  height:12.75pt' align="left">
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>

</font></font></font></font>
  </font>
  <Font style='font-size:10.0pt; color:windowtext'>
  <Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">
  <td width=74 nowrap valign=bottom style='width:55.85pt;
  height:12.75pt'>
  <p align="right" style="font-family: Times; color: black; margin: 0in">
  2,816,902&nbsp;</td>
  </font>

</font><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>

  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>
  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>
  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>
  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>
  <td width=36 valign=top style='width:26.85pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=10 colspan=2 valign=bottom style='width:7.55pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  </font>

</font></font></font>
  </font>
  <Font style='font-size:10.0pt; color:windowtext'>
  <Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">
  <td width=80 valign=bottom style='width:59.9pt;
  height:12.75pt'>
  <p align="right" style="font-family: Times; color: black; margin: 0in">
  273,097&nbsp;</td>
  </font>
  </font><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>

  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>
  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>
  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>
  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>
  <td width=8 colspan=2 valign=top style='width:6.2pt;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=23 nowrap colspan=2 valign=bottom style='width:17.55pt;height:12.75pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">
  <td width=79 nowrap valign=bottom style='width:58.95pt;
  height:12.75pt'>
  <p align="right" style="font-family: Times; color: black; margin: 0in">70,129&nbsp;</td>
  <td style='mso-cell-special:placeholder;border:none;'
  width=1>
<p align=right style='margin:0in;font-family:Times;color:black'><font size="2">&nbsp;</font></td>
 </tr>
 </font>
 <tr style='height:13.5pt;mso-row-margin-right:1.0pt'>
  <td width=191 nowrap valign=bottom style='width:143.0pt;
  height:13.5pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=64 nowrap valign=bottom style='width:48.35pt;
  height:13.5pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">
  <td width=10 valign=bottom style='width:7.8pt;border-top:solid windowtext .5pt;
  border-left:none;border-bottom:double windowtext 2.25pt;border-right:none;
  height:13.5pt' align="left">
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt'>$</Font></p>
  </td>
  <td width=74 nowrap valign=bottom style='width:55.85pt;border-top:solid windowtext .5pt;
  border-left:none;border-bottom:double windowtext 2.25pt;border-right:none;
  height:13.5pt'>
  <p align="right">2,282,728&nbsp;</td>
  </font>
  <td width=36 valign=top style='width:26.85pt;border-top:solid windowtext .5pt;
  border-left:none;border-bottom:double windowtext 2.25pt;border-right:none;
  height:13.5pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">
  <td width=10 colspan=2 valign=bottom style='width:7.55pt;border-top:solid windowtext .5pt;
  border-left:none;border-bottom:double windowtext 2.25pt;border-right:none;
  height:13.5pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt'>$</Font></p>
  </td>
  <td width=80 valign=bottom style='width:59.9pt;border-top:solid windowtext .5pt;
  border-left:none;border-bottom:double windowtext 2.25pt;border-right:none;
  height:13.5pt'>
  <p align="right">(228,651)</td>
  </font>
  <td width=8 colspan=2 valign=top style='width:6.2pt;border-top:solid windowtext .5pt;
  border-left:none;border-bottom:double windowtext 2.25pt;border-right:none;
  height:13.5pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">
  <td width=23 nowrap colspan=2 valign=bottom style='width:17.55pt;border-top:
  solid windowtext .5pt;border-left:none;border-bottom:double windowtext 2.25pt;
  border-right:none;height:13.5pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>$</Font></p>
  </td>
  <td width=79 nowrap valign=bottom style='width:58.95pt;border-top:solid windowtext .5pt;
  border-left:none;border-bottom:double windowtext 2.25pt;border-right:none;
  height:13.5pt'>
  <p align="right">326,908&nbsp;</td>
  <td style='mso-cell-special:placeholder;border:none;'
  width=1>
<p align=right style='margin:0in;font-family:Times;color:black'><font size="2">&nbsp;</font></td>
 </tr>
 </font>
 <tr style='height:13.5pt;mso-row-margin-right:1.0pt'>
  <td width=191 nowrap valign=bottom style='width:143.0pt;
  height:13.5pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=64 nowrap valign=bottom style='width:48.35pt;
  height:13.5pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=10 valign=top style='width:7.8pt;
  height:13.5pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=74 nowrap valign=bottom style='width:55.85pt;
  height:13.5pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=36 valign=top style='width:26.85pt;
  height:13.5pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=10 colspan=2 valign=top style='width:7.55pt;
  height:13.5pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=80 valign=top style='width:59.9pt;
  height:13.5pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=8 colspan=2 valign=top style='width:6.2pt;
  height:13.5pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=23 nowrap colspan=2 valign=bottom style='width:17.55pt;height:13.5pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=79 nowrap valign=bottom style='width:58.95pt;
  height:13.5pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <Font style='font-size:10.0pt; color:windowtext' face="Times New Roman" size="2">
  <td style='mso-cell-special:placeholder;border:none;'
  width=1>
<p align=right style='margin:0in;font-family:Times;color:black'>&nbsp;</td>
 </tr>

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<p style="margin-top: 1; margin-bottom: 1">During fiscal year 2003
and fiscal 2004 we changed our HSS Generation I emitter design to eliminate the
requirement for a vacuum in the emitter, and we improved film quality. During
fiscal 2004, we made further raw material improvements in the electronics and
the manner in which the film and emitters are produced.&nbsp;&nbsp;We believe that our recently introduced HSS
Generation III product is more reliable. We therefore expect that warranty costs
will decrease in fiscal 2005, and that HSS product sales will produce positive
margins. </p>


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<p style="margin-top: 1; margin-bottom: 1">&nbsp;</p>

<p style="margin-top: 1; margin-bottom: 1">Gross profit for our
Government Group was $2,816,902 in fiscal 2004, or 58% of revenue.&nbsp;&nbsp;Gross profit percentage continues to be
highly dependent on sales prices, volumes, purchasing costs and overhead allocations.&nbsp;&nbsp;Our various sound products have different
margins, so product sales mix will materially affect gross profits. In
addition, we continue to make model updates and changes including raw material
and component changes thus changing product costs. We therefore do not believe
that historical gross profit margins should be relied upon as an indicator of
future gross profit margins.</p>

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<p style="margin-top: 1; margin-bottom: 1"><i><b>Selling, General and Administrative Expenses</b></i></p>
<p style="margin-top: 1; margin-bottom: 1">Selling, general and administrative expenses as
a percentage of sales were 92% in fiscal 2004, 370% in fiscal 2003 and 301% in
fiscal 2002. These costs in fiscal 2004 totaled $5,309,547, an increase of
$445,836 from the $4,863,711 incurred in fiscal 2003. Legal and professional
costs decreased $1,316,323 to $852,644 in fiscal 2004 compared to $2,168,967 in
fiscal 2003. Included in legal and professional costs in fiscal 2004 was an
estimated settlement cost accrual of $150,000 associated with an ongoing legal
action with a former licensee. Included in legal and professional costs in fiscal
2003 were settlement costs and accruals of $1,233,754 related to legal
settlements and a buyout of NeoPlanar royalties due. Personnel costs increased
from $1,562,852 in fiscal 2003 to $2,449,739 in fiscal 2004 as a result of
increased headcount. </p>
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<p style="margin-top: 1; margin-bottom: 1">We incurred non-cash
selling, general and administrative expenses in each of the three years. In
fiscal 2004 we incurred $65,863 of non-cash compensation from extending the
exercise period of options for certain terminated employees due to stock
trading restrictions. 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
non-employees. 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 non-employees. </p>
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<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in;font-size:10.0pt; font-family:"Times New Roman";font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</p>

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<p align="center"><font size="2" face="Times New Roman">- 21 -</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>

<p style="margin-top: 1; margin-bottom: 1">During fiscal 2004, we reviewed the ongoing
value of our capitalized patent expenses and identified some of these costs as
being associated with patents that are no longer associated with our business
strategy.&nbsp;&nbsp;As a result, we incurred a
charge in fiscal 2004 of $37,798 for the impairment of previously capitalized
patent expenditures.</p>
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<p style="margin-top: 1; margin-bottom: 1">We may expend additional
resources on marketing our proprietary sound technologies in future periods,
which may increase selling, general and administrative expenses. We also expect
to incur additional costs in fiscal 2005 to comply with various sections of the
Sarbanes-Oxley Act, particularly those related to Section 404 concerning
management assessment of internal controls.&nbsp;We do not currently have an estimate of these increased costs, but they
are expected to include increased staffing, outside consultants and increased
legal and audit costs.</p>
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<p style="margin-top: 1; margin-bottom: 1"><i><b>Research and Development Expenses</b></i></p>
<p style="margin-top: 1; margin-bottom: 1">Research and development
expenses increased from fiscal 2003 to fiscal 2004.&nbsp;&nbsp;Fiscal 2004 expenses were $2,988,784 of which salaries, benefits
and consultant expenses accounted for $2,015,828 or 67% of total costs.&nbsp;&nbsp;Fiscal 2003 research and development
expenses declined from fiscal 2002 to fiscal 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. In fiscal
2003, we issued stock options to an electronics design consultant and incurred
non-cash costs of $47,782 in that year. Outside consulting costs and testing
supplies totaled $1,066,597 in fiscal 2002 and declined to $207,390 in fiscal
2003 as we made the transition from research and development to product
manufacturing and sales. </p>
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<p style="margin-top: 1; margin-bottom: 1">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 2005 research and
development costs to be somewhat higher than fiscal 2004 levels based on
current plans and staffing.</p>

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<p style='margin:0in;font-family:Times;color:black'><i><b>Loss From Operations</b></i></p>

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<p style='margin:0in;font-family:Times;color:black'>Total operating expenses were $8,298,331 in
fiscal 2004 compared to $7,332,549 in fiscal 2003 and $6,689,292 in fiscal
2002. The increase in fiscal 2004 operating expenses resulted from the increase
in both research and development and selling, general and administrative
expenses.&nbsp;&nbsp;The increase in operating
expenses in fiscal 2003 over fiscal 2002 was due to the increase in selling,
general and administrative expenses partially offset by a decrease in research
and development expenses.&nbsp;&nbsp;As a result
of the operating expenses incurred in fiscal 2004, our loss from operations was
$6,015,603 compared to a loss from operations of $7,561,200 in fiscal 2003,
This reduction in loss from operations from fiscal 2003 to fiscal 2004 is due
in part to the improvement of $2,511,379 in gross profit in fiscal 2004 versus
fiscal 2003, partially offset by higher operating expenses.&nbsp;&nbsp;We expect increased product sales in fiscal
2005, offset in part by somewhat higher operating expenses, to reduce the loss
from operations from fiscal 2004 levels.</p>

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<p style='margin:0in;font-family:Times;color:black'><i><b>Other Income (Expense)</b></i></p>

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<p style='margin:0in;font-family:Times;color:black'>In fiscal 2004, we earned $58,056 of interest on
our cash balances. 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. During fiscal 2003, our outstanding long-term debt was converted to
equity causing the decline in interest expense from fiscal 2002 to 2003.</p>

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<p style='margin:0in;font-family:Times;color:black;page-break-after:avoid'><i>
<b>Net Loss</b></i></p>

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<p style='margin:0in;font-family:Times;color:black;page-break-after:avoid'>The net loss for fiscal
2004 was $5,960,436 compared to the net loss of $8,227,013 in fiscal 2003. The
net loss for fiscal 2002 was $8,220,132.</font></font><Font style='font-size:10.0pt;font-family:"Times New Roman";
color:windowtext'> We had no tax expense for each of the last three fiscal years
due to net losses. </Font></p>

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<p style="margin-top: 1; margin-bottom: 1"><i><b>Net Loss Available to Common Stockholders</b></i></p>
<p style="margin-top: 1; margin-bottom: 1">Net loss
available to common stockholders was increased during fiscal 2004, 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. The
net loss available to common stockholders was also increased in fiscal 2004,
2003 and 2002 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 $1,365,349
in fiscal 2004, $2,409,228 in fiscal 2003 and $282,912 in fiscal 2002
increasing the net loss in each year. Accordingly, the net loss available to
common stockholders was $7,325,785, $10,636,241 and $8,503,044 in fiscal 2004,
2003 and 2002, respectively.</p>

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<p style='margin:0in;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>
<b>Liquidity and Capital Resources</b></p>

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<p style='margin:0in;font-family:Times;color:black'>We continue to experience
significant negative cash flow from operating activities including developing,
introducing and marketing our proprietary sound technologies.&nbsp;&nbsp;We have financed our working capital requirements through cash
generated from products sales and from financing activities. Cash at September
30, 2004 was $4,178,968 compared to $9,850,358 at September 30, 2003.&nbsp;&nbsp;The decrease in cash was primarily the
result of the operating loss and cash used to support operating activities. </p>

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<p align="center"><font size="2" face="Times New Roman">- 22 -</font></p>
<hr size="3" color="#000080">
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  &nbsp;
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<p style='margin:0in;font-family:Times;color:black'>
In December 2004,
we received a firm order for $4.5 million in LRAD products from ADS, Inc. for
use by the U.S. Army 3rd Infantry Division, Fort Stewart, Georgia.&nbsp; The order also
includes $0.4 million in ancillary products which we are providing on a
value-added reseller basis along with the LRAD units.&nbsp; The order calls for
deliveries in December 2004 and January 2005 and customary payment terms.</p>

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&nbsp;</p>

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<p style='margin:0in;font-family:Times;color:black'>
In December 2004, we sold for cash in a private offering an aggregate of
$2,000,000 of unsecured subordinated promissory notes due December 31, 2006. In connection with the financing, we also issued five-year warrants to purchase
an aggregate of 150,000 shares, 75,000 of which have an exercise price of $9.28
per share, and 75,000 of which have an exercise price of $8.60 per share. A trust affiliated with Elwood G. Norris, our Chairman and the beneficial owner
of 19.5% of our common stock before the financing, purchased a note in the
principal amount of $500,000 and received a warrant exercisable for 37,500
shares with an exercise price of $9.28 per share. For more information on
this financing, see &#147;Financing Activities&#148; below.</p>

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<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>In
December 2004, we entered into a Committed Equity Financing Facility (CEFF)
with Kingsbridge Capital Ltd., pursuant to which Kingsbridge committed, subject
to certain significant limiting conditions, to
purchase up to $25 million of our common stock to support future growth.&nbsp;&nbsp;As part of the arrangement, we issued a
warrant to Kingsbridge to purchase 275,000 shares of our common stock at a
price of $8.60 per share. The warrant is exercisable beginning six months after
the date of grant and for a period of five years thereafter. Subject to certain conditions and limitations, from
time to time under the CEFF, we may require Kingsbridge to purchase
newly-issued shares of our common stock at a price that is between 88% and 92%
of the volume weighted average price during a 15 day purchase period, and
thereby raise capital as required, at the time, price and in the amounts deemed
suitable to us.&nbsp;For
each election to sell shares to Kingsbridge, we select the lowest threshold
price at which our stock may be sold, but the threshold price cannot be lower
than $3.00 per share.&nbsp; Our agreement with Kingsbridge permits Kingsbridge to
terminate the CEFF if Kingsbridge determines that a material and adverse event
has occurred affecting the business, operations, properties or financial
condition of our company, or if any situation occurs that would interfere with
our ability to perform any of our obligations under the agreement.<Font style='font-size:10.0pt;font-family:"Times New Roman"; color:windowtext'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>
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The CEFF requires us to have a resale registration </Font><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
statement filed within 45 days of entering into the CEFF, and to have such
registration statement declared effective by the Securities and Exchange
Commission (SEC) within 45 days or 120 days of filing, depending on whether the
SEC elects to review the registration statement.&nbsp;No draws can be made by
  the Company until the registration statement is effective. As of December 14, 2004, we had
not filed the required resale registration statement.</Font></font></p>

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  The terms of the CEFF require
  us to pay liquidated damages in the event that a registration statement is not
  available for the resale of securities purchased by Kingsbridge under the CEFF
  or by exercise of its warrant.&nbsp; Except for certain permitted periods of
  ineffectiveness described below, we are obligated to pay to Kingsbridge an
  amount, up to $2.5 million, equal to the number of shares purchased under
  the CEFF and held by Kingsbridge at the date the registration statement
becomes unavailable, multiplied by any positive difference in
  price between the volume weighted average price on the trading day prior to
  such period of unavailability and the volume weighted average price on the
first trading day after the period of unavailability.&nbsp; We may, in lieu of
paying such liquidated damages, offer to repurchase the securities held by
Kingsbridge for a price equal to the volume weighted average price on the
trading day prior to such period of unavailability.</font></p>

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  <p style="margin-top: 1; margin-bottom: 1">We are
  permitted to suspend the availability of the registration statement for resale
  of the shares purchased by Kingsbridge if there is material undisclosed
  information then existing or if we intend to file another&nbsp; registration
  statement with the SEC.&nbsp; However, we are permitted to suspend the use of the
  registration statement for only up to 30 days during any calendar year, and no
  more than six times in any 12 month period. In the event that we exercise this
  right of suspension within 15 trading days following any settlement date for
  the purchase of our stock under the CEFF, we must pay to Kingsbridge as
  liquidated damages a percentage of the decline in value, if any, of shares
  purchased during the most recent draw down period and held by Kingsbridge, as
  follows: 75% if such notice of suspension is delivered prior to the fifth
  trading day after a settlement date, 50% if such notice of suspension is
  delivered on or after the fifth and prior to the tenth trading day after a
  settlement date, and 25% if such notice of suspension is delivered on or after
  the tenth and prior to the fifteenth trading day after a settlement date.&nbsp; The
  amount of such liquidated damages for any one period of suspension may not
  exceed $1.75 million.&nbsp; We may, in lieu of paying such liquidated damages,
  offer to repurchase the securities held by Kingsbridge for a price equal to
  the volume weighted average price on the trading day prior to such period of
  ineffectiveness.&nbsp; We may also elect to pay such liquidated damages in shares
  of common stock valued at the market value on the first trading day after such
  permitted suspension ends.<br>
&nbsp;</p>

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<p style='margin:1 0in;font-size:12.0pt;font-family:Times;color:black'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Based on such factors as market
conditions, financing needs and the time required for the SEC to declare the
resale registration statement effective, we currently expect that we may begin
to utilize the CEFF during fiscal 2005, in order to fund working capital
requirements. However, the timing and extent of our ability to utilize the CEFF
is uncertain.
We are obligated to use 40% of the proceeds we may receive from the CEFF to
prepay any outstanding interest and principal on the notes sold in December
2004. Under the rules of
the Nasdaq Stock Market, the maximum number of shares we may sell to Kingsbridge
without approval of our stockholders is 3,684,782 (exclusive of the warrant
shares), which may further limit the
amount of proceeds we are able to obtain from the CEFF.&nbsp;&nbsp; We agreed to pay to a
consultant a finder fee equal to 4% of the first $5 million raised under the
CEFF, 3% for the second $5 million raised under the CEFF, 2% for the third $5
million raised under the CEFF, and 1.5% for any additional amounts raised under
the CEFF.
See &quot;Risk Factors&quot; below for a discussion of other risks associated
with the CEFF.</Font></p>

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  &nbsp;
</div>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Other
than cash, cash equivalents, the CEFF and the private offering described
above, we have no other 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.&nbsp;&nbsp;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>

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<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Principal
factors that could affect the availability of our internally generated funds
include:</Font></p>

<Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">

<ul>
 <li>government spending levels;<br>
&nbsp;</li>
 <li>introduction of competing technologies;<br>
&nbsp;</li>
 <li>failure of sales from our Government Group or Business Group to meet planned projections;<br>
&nbsp;</li>
 <li>product mix and effect on margins; and<br>
&nbsp;</li>
 <li>product acceptance in new markets.</li>
</ul>
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<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Principal
factors that could affect the availability to obtain cash from external sources
include:</Font></p>

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<ul>
 <li>failure to obtain an effective registration statement as required by our CEFF;<br>
&nbsp;</li>
 <li>reduction of our stock price to a level below $3.00; at which price Kingsbridge is not
 obligated to buy our shares;<br>
&nbsp;</li>
 <li>volatility in the capital markets; and<br>
&nbsp;</li>
 <li>market price and trading volume of our common stock.</li>
</ul>

</font><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>
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<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Based
on our current cash position, our recently received order for $4.9 million in
LRAD products, and the private offering, and assuming currently planned
expenditures and level of operations, we believe
we will have sufficient cash for operations for the next twelve months. We
believe increased sales of LRAD, HSS and, to a lesser extent, NeoPlanar
products will continue to contribute cash in fiscal 2005. We believe that any
investment capital we may require will be available to us, but there can be no
guarantee that we will be able to raise funds on terms acceptable to us, or at
all. 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>

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<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><b><i ><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Cash Flows</Font></i></b></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><b><i ><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></i></b></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><i style='mso-bidi-font-style:normal'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Operating Activities</Font></i></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Our
net cash used in operating activities was $6,030,043 for the year ended
September 30, 2004 compared to $5,457,369 for the year ended September 30,
2003. For the year ended September 30, 2004, the net loss of $5,960,436
included certain expenses not requiring the use of cash totaling $535,280 or a
net of $5,425,156. In addition, in fiscal 2004, cash was used in operating
activities through an increase of $332,151 in inventories, an increase of
$742,585 in accounts receivable, and an increase of $122,570 in prepaid expenses.
Further cash provided by operating activities included a $592,419 increase in
accounts payable and accrued liabilities.<br>
&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>At
September 30, 2004, we had working capital of $3,472,984 compared to working
capital of $8,484,210 at September 30, 2003. Net working capital, excluding
cash and short-term debt, was a deficit of $695,017 at September 30, 2004. This
represents a decrease of&nbsp;&nbsp;$661,216 from
the net working capital deficit at September 30, 2003 of $1,356,233. The
decrease in the deficit in net working capital primarily resulted from
increases in receivable balances offset in part by increases in accounts
payable. In fiscal 2005, we expect increases in receivable and inventory
balances as revenues increase.</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>At
September 30, 2004, we had trade accounts receivable of&nbsp;&nbsp;$926,747.&nbsp;&nbsp;This compares to $184,162 in trade accounts
receivable at September 30, 2003. The
level of trade accounts receivable at September 30, 2004 represented
approximately 43 days of revenues. Terms with individual customers vary
greatly. We typically require thirty-day terms for our sound technology
components and products. Our receivables can vary dramatically due to overall sales
volumes and due to quarterly variations in sales and timing of shipments to and
receipts from large customers and the timing of contract payments.</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<i ><Font style='font-size:10.0pt;font-family:
"Times New Roman";mso-fareast-font-family:"Times New Roman";color:black;
mso-ansi-language:EN-US;mso-fareast-language:EN-US;mso-bidi-language:AR-SA'></Font></i>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><i ><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Investing Activities</Font></i></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>For
the year ended September 30, 2004, capital expenditures were $395,932 for the purchase
of laboratory and computer equipment and software and $346,818 for investment
in patents and new patent applications. We anticipate continued capital
expenditures for patents in fiscal 2005. </Font></p>

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<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
page-break-after:avoid'><i ><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Financing Activities</Font></i></p>

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<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
page-break-after:avoid'><font size="2">During the 2004, 2003 and 2002 fiscal
years, we</font></font><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'><Font style='font-size:10.0pt;font-family:"Times New Roman"'> financed our working capital requirements primarily through the sale of
common and preferred stock and warrants, secured promissory notes and the exercise of stock
options.&nbsp;&nbsp;In fiscal 2004, we received
cash proceeds from the exercise of options and warrants of $1,111,317.&nbsp;&nbsp;In January 2003, we received $500,000 from
the sale of senior secured promissory notes. In February 2003, we received
proceeds of $2,432,500 and converted senior secured promissory notes in the
aggregate principal amount of $1,000,000 from the sale of shares of our Series
E Preferred Stock and warrants exercisable for common stock.&nbsp;&nbsp;In July 2003, we received proceeds of
$10,000,000 from the sale of common stock and warrants.&nbsp;&nbsp;In fiscal 2003, we received proceeds of
$1,614,227 from the exercise of options.</Font></p>

<p style='margin:0pt;margin:0in;text-align:justify;font-size:12.0pt;font-family:"Times New Roman";'><Font style='font-size:10.0pt;color:black'>&nbsp;</Font></p>

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<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>In December 2004, we sold for
cash in a private offering an aggregate of $2,000,000 of unsecured subordinated
promissory notes due December 31, 2006.&nbsp; Interest on these notes accrues at the
rate of 8% per year and is due and payable quarterly in arrears.&nbsp; We are
required to use 40% of the net proceeds of any future equity financing to prepay
these notes, including any amounts we raise pursuant to the CEFF.&nbsp; We may also
prepay these notes in our discretion at any time without penalty after June 30,
2005. </p>
<p class="Normal">In connection with the issuance
of these notes, each purchaser was granted a warrant to purchase 7,500 shares of
our common stock until December 31, 2009 for each $100,000 of notes purchased
(prorated for amounts less than $100,000) such that we issued in the aggregate
warrants exercisable for an aggregate of 150,000 shares of our common stock.&nbsp;
The exercise price of the warrants was $9.28 per share for purchasers who were
directors, officers, employees or consultants of our company, or affiliates of
such persons, and $8.60 per share for other purchasers.&nbsp; Warrants exercisable
for 75,000 shares were issued at each such exercise price.&nbsp; The holders of these
warrants are entitled to be included on any registration statement we file after
the registration statement for the CEFF described above, subject to customary
exceptions and cut-back rights.</p>
<p class="Normal">A trust affiliated with Elwood
G. Norris, our Chairman and the beneficial owner of 19.5% of our common stock
before the financing, purchased a note in the principal amount of $500,000 and
received a warrant exercisable for 37,500 shares with an exercise price of $9.28
per share.&nbsp; Mr. Norris now beneficially owns 19.7% of our common stock</p>
</Font>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>In
December 2004, we entered into a Committed Equity Financing Facility (CEFF)
with Kingsbridge Capital Ltd., pursuant to which Kingsbridge committed to
purchase up to $25 million of our common stock to support future growth as
described above. We are obligated to use 40% of the proceeds we may receive from
the CEFF to prepay any outstanding interest and principal on the notes sold in
December 2004.</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>

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<p class="Normal" style="margin-top: 1; margin-bottom: 1"><b>
Off-Balance Sheet Arrangements</b></p>
<Font style='font-size:10.0pt; font-family:Times; color:black>We do not have any
off-balance sheet arrangements, financings or other relationships with
unconsolidated entities or other persons.</p>
</font>
  <Font style='font-size:10.0pt; font-family:Times; color:black>
  <p style="margin-top: 1; margin-bottom: 1">
 We do not have
  any off-balance sheet arrangements, financings or other relationships with
  unconsolidated entities or other persons.</p>

  <p style="margin-top: 1; margin-bottom: 1">
 &nbsp;</p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><b><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Contractual Commitments
and Commercial Commitments</Font></b></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:"Times New Roman";color:black;'><Font style='font-size:10.0pt'>The following table
summarizes our contractual obligations at September 30, 2004, and the effect
such obligations are expected to have on our liquidity and cash flow in future
periods:</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:"Times New Roman";color:black;'><Font style='font-size:10.0pt'>&nbsp;</Font></p>
</font>
<Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">

<table border=0 cellspacing=0 cellpadding=0 width=569 style='width:427.0pt;
 border-collapse:collapse;mso-padding-alt:0in 0in 0in 0in'>
 <tr style='height:25.5pt'>
  <td width=216 valign=bottom style='width:2.25in;border:none;border-bottom:
  solid windowtext .5pt;background:white;height:25.5pt'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center'><b><Font style='font-size:10.0pt'>Contractual Obligations </Font></b></p>
  </td>
  <td width=65 valign=bottom style='width:49.0pt;border:none;border-bottom:
  solid windowtext .5pt;background:white;height:25.5pt'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center'><b><Font style='font-size:10.0pt'>Total </Font></b></p>
  </td>
  <td width=72 valign=bottom style='width:.75in;border:none;border-bottom:solid windowtext .5pt;
  background:white;height:25.5pt'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center'><b><Font style='font-size:10.0pt'>&nbsp;Less than 1
  Year </Font></b></p>
  </td>
  <td width=72 valign=bottom style='width:.75in;border:none;border-bottom:solid windowtext .5pt;
  background:white;height:25.5pt'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center'><b><Font style='font-size:10.0pt'>&nbsp;1-3 Years </Font></b></p>
  </td>
  <td width=72 valign=bottom style='width:.75in;border:none;border-bottom:solid windowtext .5pt;
  background:white;height:25.5pt'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center'><b><Font style='font-size:10.0pt'>&nbsp;4-5 Years </Font></b></p>
  </td>
  <td width=72 valign=bottom style='width:.75in;border:none;border-bottom:solid windowtext .5pt;
  background:white;height:25.5pt'>
  <p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:center'><b><Font style='font-size:10.0pt'>&nbsp;After 5
  Years </Font></b></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='background:white;
  height:12.75pt'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt'>&nbsp;Capital leases </Font></p>
  </td>
  <td nowrap valign=bottom style='background:white;
  height:12.75pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>$&nbsp;&nbsp;&nbsp;25,612 </Font></p>
  </td>
  <td nowrap valign=bottom style='background:white;
  height:12.75pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>$&nbsp;&nbsp;&nbsp;12,806 </Font></p>
  </td>
  <td nowrap valign=bottom style='background:white;
  height:12.75pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>$&nbsp;&nbsp;&nbsp;12,806 </Font></p>
  </td>
  <td nowrap valign=bottom style='background:white;
  height:12.75pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>-&nbsp;&nbsp;&nbsp;</Font></p>
  </td>
  <td nowrap valign=bottom style='background:white;
  height:12.75pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>-&nbsp;&nbsp;</Font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='background:white;
  height:12.75pt'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt'>&nbsp;Operating leases </Font></p>
  </td>
  <td nowrap valign=bottom style='background:white;
  height:12.75pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>457,760 </Font></p>
  </td>
  <td nowrap valign=bottom style='background:white;
  height:12.75pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>237,262 </Font></p>
  </td>
  <td nowrap valign=bottom style='background:white;
  height:12.75pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>218,146 </Font></p>
  </td>
  <td nowrap valign=bottom style='background:white;
  height:12.75pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,352 </Font></p>
  </td>
  <td nowrap valign=bottom style='background:white;
  height:12.75pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>-&nbsp;&nbsp;</Font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='background:white;
  height:12.75pt'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt'>&nbsp;Employment agreements </Font></p>
  </td>
  <td nowrap valign=bottom style='background:white;
  height:12.75pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>12,917 </Font></p>
  </td>
  <td nowrap valign=bottom style='background:white;
  height:12.75pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>12,917 </Font></p>
  </td>
  <td nowrap valign=bottom style='background:white;
  height:12.75pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>-&nbsp;&nbsp;</Font></p>
  </td>
  <td nowrap valign=bottom style='background:white;
  height:12.75pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>-&nbsp;&nbsp;</Font></p>
  </td>
  <td nowrap valign=bottom style='background:white;
  height:12.75pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>-&nbsp;&nbsp;</Font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='background:white;
  height:12.75pt'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt'>&nbsp;Total contractual cash obligations </Font></p>
  </td>
  <td nowrap valign=bottom style='border-top:solid windowtext .5pt;border-left:
  none;border-bottom:solid windowtext .5pt;border-right:none;background:white;
  height:12.75pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>$ 496,289 </Font></p>
  </td>
  <td nowrap valign=bottom style='border-top:solid windowtext .5pt;border-left:
  none;border-bottom:solid windowtext .5pt;border-right:none;background:white;
  height:12.75pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>$ 262,985 </Font></p>
  </td>
  <td nowrap valign=bottom style='border-top:solid windowtext .5pt;border-left:
  none;border-bottom:solid windowtext .5pt;border-right:none;background:white;
  height:12.75pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>$ 230,952 </Font></p>
  </td>
  <td nowrap valign=bottom style='border-top:solid windowtext .5pt;border-left:
  none;border-bottom:solid windowtext .5pt;border-right:none;background:white;
  height:12.75pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,352 </Font></p>
  </td>
  <td nowrap valign=bottom style='border-top:solid windowtext .5pt;border-left:
  none;border-bottom:solid windowtext .5pt;border-right:none;background:white;
  height:12.75pt'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt'>-&nbsp;&nbsp;</Font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='background:white;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt'>&nbsp;</Font></p>
  </td>
  <td nowrap valign=bottom style='background:white;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt'>&nbsp;</Font></p>
  </td>
  <td nowrap valign=bottom style='background:white;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt'>&nbsp;</Font></p>
  </td>
  <td nowrap valign=bottom style='background:white;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt'>&nbsp;</Font></p>
  </td>
  <td nowrap valign=bottom style='background:white;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt'>&nbsp;</Font></p>
  </td>
  <td nowrap valign=bottom style='background:white;
  height:12.75pt'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt'>&nbsp;</Font></p>
  </td>
 </tr>
</table>

</font><Font style='font-size:10.0pt; font-family:Times; color:windowtext'>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:"Times New Roman";color:black;'><Font style='font-size:10.0pt'>&nbsp;</Font></p>

<p style="margin-top: 1; margin-bottom: 1">The above table does not include the
long term debt obligations associated with the $2,000,000 in subordinated notes
we sold in December 2004 and due December 31, 2006, with interest at the rate of
8% per year payable quarterly in arrears.<br>
&nbsp;</p>

<p style="margin-top: 1; margin-bottom: 1"><b>New Accounting Pronouncements</b></p>
<p style="margin-top: 1; margin-bottom: 1">In December 2004, the Financial
Accounting Standards Board (FASB) issued Financial Accounting Standard (FAS)
123(R), &#147;Share Based Payment&#148;.&nbsp; Statement 123(R) is effective for public
companies at the beginning of the first interim or annual period after June 15,
2005. This statement eliminates the ability to account for share-based
compensation using the intrinsic value-based method under APB Opinion No. 25,
&#147;Accounting for Stock Issued to Employees.&#148; Statement 123(R) would require the
Company to calculate equity-based compensation expense for stock options and
employee stock purchase plan rights granted to employees based on the fair value
of the equity instrument at the time of grant. Currently, the Company discloses
the pro forma net income (loss) and the related pro forma income (loss) per
share information in accordance with FAS 123 and FAS 148, &#147;Accounting for
Stock-Based Compensation Costs-Transition and Disclosure.&#148; The Company has not
evaluated the impact that Statement 123(R) will have on its financial position
and results of operations.</p>
<p align="center"><font size="2" face="Times New Roman">- 25 -</font></p>
<hr size="3" color="#000080">
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  &nbsp;
</div>

<p style="margin-top: 1; margin-bottom: 1">In
December 2003, the FASB issued FIN&nbsp;46-R, &#147;Consolidation of Variable Interest Entities
- - an interpretation of ARB&nbsp;51&nbsp;(revised December 2003)&#148;, which replaces FIN&nbsp;46.&nbsp; FIN&nbsp;46-R incorporates certain modifications to FIN 46 adopted by the FASB subsequent to the issuance of FIN&nbsp;46, including modifications of the scope of FIN&nbsp;46.&nbsp; For all non-special purpose entities (&#147;SPE&#148;) created prior to February&nbsp;1, 2003, public entities will be required to adopt FIN 46-R at the end of the first interim or annual reporting period ending after March&nbsp;15, 2004.&nbsp; For all entities (regardless of whether the entity is an SPE) that were created subsequent to January&nbsp;31, 2003, public entities are already required to apply the provisions of FIN 46, and should continue doing so unless they elect to adopt the provisions of Fin 46-R early as of the first interim or annual reporting period ending after December&nbsp;15, 2003.&nbsp; If they do not elect to adopt FIN&nbsp;46-R early, public entities would be required to apply FIN&nbsp;46-R to those pos
t-January&nbsp;31, 2003 entities as of the end of the first interim or annual reporting period ending after March&nbsp;15, 2004. The adoption of FIN 46-R for non-SPEs
did not have a material impact on the Company&#146;s financial position, results of
operations or cash</FONT></font></font>. </p>
<p style="margin-top: 1; margin-bottom: 1"><font size="2">&nbsp;</font></p>
<p style="margin-top: 1; margin-bottom: 1">
<Font style='font-size:10.0pt; font-family:Times; color:windowtext' face="Times New Roman">

In March 2004, the
Emerging Issues Task Force (&quot;EITF&quot;) reached a consensus on Issue No. 03-1, &quot;The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments.&quot; EITF 03-1 provides guidance on other-than-temporary impairment
models for marketable debt and equity securities accounted for under SFAS No.
115, &quot;Accounting for Certain Investments in Debt and Equity Securities,&quot; and
SFAS No. 124, &quot;Accounting for Certain Investments Held by Not-for-Profit
Organizations,&quot; and non-marketable equity securities accounted for under the
cost method. The EITF developed a basic three-step model to evaluate whether an
investment is other-than-temporarily impaired. On September 30, 2004, the FASB
approved the issuance of FASB Staff Position (FSP) EITF 03-1-1, which delays the
effective date until additional guidance is issued for the application of the
recognition and measurement provisions of EITF 03-1 to investments in securities
that are impaired. The Company does not expect the adoption of EITF 03-1 to
have a material effect on its consolidated financial position, results of
operations or cash flows.</FONT><font face="Times New Roman"> </font></p>

<p>
<Font style='font-size:10.0pt;font-family:"Times New Roman"; font-weight:700'>

Risk Factors</p></font>

<p style="margin-top: 1; margin-bottom: 1">
<Font style='font-size:10.0pt;font-family:"Times New Roman"; font-style:italic'>
An investment in our company involves a high degree of
risk.&nbsp; 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.&nbsp; You should consider these matters in
conjunction with the other information included or incorporated by reference in
this report. Our results of operations or financial condition could be
seriously harmed, and the trading price of our common stock may decline due to
any of these or other risks.</font></p>


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&nbsp;</p>


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<p style='margin:1 0in;font-family:Times;color:black'><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>We have a history of net losses. We expect to continue to incur net losses and we may not achieve or maintain profitability.&nbsp; </STRONG></FONT> </p>

<p style='margin:0in;font-family:Times;color:black'>&nbsp;</p>

<p style='margin:0in;font-family:Times;color:black'><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We have incurred significant operating losses and anticipate continued losses in fiscal 2005. At September 30, 2004, we had an accumulated deficit of $42,327,493. In addition, for fiscal 2004, we incurred a net loss of $5,960,436. 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>

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<p style='margin:0in;font-family:Times;color:black'><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>
We may need additional capital for growth. </STRONG></FONT></p>

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Our current plans
indicate that depending on sales, we may need additional capital to support our
growth.&nbsp; We may generate a portion of these funds from operations.&nbsp;  </font></p>

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&nbsp;</p>
<p style='margin:0in;font-family:Times;color:black'><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The actual amount of
funds that we will need will be determined by many factors, some of which are
beyond our control, and we may need funds sooner than currently anticipated.&nbsp;
Principal factors that could affect the availability of our internally generated
funds include:</FONT></p>

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<p style="margin-top: 0; margin-bottom: 0">

<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#149;
government spending
levels;<br>
&nbsp;</font></p>
<p style="margin-top: 0; margin-bottom: 0">
<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#149;
introduction of new competing technologies;<br>
&nbsp;</font></p>
<p style="margin-top: 0; margin-bottom: 0">
<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#149;
failure of sales from our Government Group to meet planned projections;<br>
&nbsp;</font></p>
<p style="margin-top: 0; margin-bottom: 0">
<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#149;
product mix and effect on margins; and<br>
&nbsp;</font></p>
<p style="margin-top: 0; margin-bottom: 0">
<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#149;
acceptance of our products in new markets.<br>
&nbsp;</font></p>
<p style="margin-top: 0; margin-bottom: 0"></p>
<p style='margin:0in;font-family:Times;color:black'><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">When we require
additional funds, general market conditions or the then-current market price of
our common stock may not support capital raising transactions.&nbsp; If we require
additional funds and we are unable to obtain them on a timely basis or on terms
favorable to us, we may be required to scale back our research and development
efforts, sell or license some or all of our technology or assets or curtail or
cease operations.&nbsp; If we raise additional funds by selling additional shares of
our capital stock or securities convertible into common stock, the ownership
interest of our stockholders will be diluted. </FONT></p>
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<p><b>The Committed Equity Financing Facility may have a significant dilutive impact on our stockholders, and the potential unavailability of this facility would negatively affect our financing activities.</b></p>
<p>We have entered into a Committed Equity Financing Facility, or CEFF, with Kingsbridge Capital Limited. Under the terms of our agreement with Kingsbridge, we may, at our sole discretion, sell to Kingsbridge, and Kingsbridge would be obligated to purchase, shares of our common stock for up to $25 million in proceeds to us. The price at which we may sell shares of common stock under the agreement is based on a discount to the volume weighted average market price of the common stock for 15 trading days following each of our elections to sell shares. For each election to sell shares, we select the lowest threshold price at which our stock may be sold, but the threshold price cannot be lower than $3.00 per share. In the event the market price of our common stock falls below $3.41 per share, which after giving affect to the discount would result in a price per share lower that the $3.00
minimum threshold price, the CEFF will not be an available source of financing.
In addition, we are obligated to use 40% of the proceeds we may raise from the
CEFF to prepay any outstanding interest and principal on the notes we sold in
December 2004. Our agreement with Kingsbridge permits Kingsbridge to terminate the CEFF if Kingsbridge determines that a material and adverse event has occurred affecting the business, operations, properties or financial condition of our
company, or if any situation occurs that would interfere with our ability to perform any of our obligations under the agreement.</p>
<p>The issuance of shares under the CEFF will have a dilutive impact on other stockholders and the issuance or even potential issuance of such shares could have a negative effect on the market price of our common stock. In addition, if we draw down the CEFF, we will issue shares to Kingsbridge at a discount ranging from 8% to 12% of the daily volume weighted average prices of our common stock during the 15 day trading period after initiation of each draw down. Issuing shares at such a discount will further dilute the interests of other stockholders.<br>
&nbsp;</p>

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<p style="margin-top: 1; margin-bottom: 1">To the extent that Kingsbridge sells shares of our common stock issued under the CEFF to third parties, our stock price may decrease due to the additional selling pressure in the market. The perceived risk of dilution from sales of stock to or by Kingsbridge may cause holders of our common stock to sell their shares, or it may encourage short sales. This could contribute to a decline in our stock price.</p>

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<b>The Committed Equity Financing Facility imposes certain
liquidated damages and limitations on our ability to issue future priced securities. These liquidated damages and limitations may significantly impair our liquidity and ability to raise capital.</b></p>
<p style='margin:1 0in;font-family:Times;color:black'>&nbsp;</p>
</font><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
<p style="margin-top: 1; margin-bottom: 1">The terms of the CEFF require us to pay liquidated damages in the event that a registration statement is not available for the resale of securities purchased by Kingsbridge under the CEFF or by exercise of its warrant. These liquidated damages provisions generally require us to pay an amount based on the decline in value, if any, of shares held by Kingsbridge during the time a registration statement is unavailable. See "Liquidity and Capital Resources" above for a further description of these liquidated damages provisions. The liquidated damages could severely affect our liquidity, or to the extent we are permitted to pay such damages through the issuance of common stock, cause dilution to our common stockholders.</p>
<p style="margin-top: 1; margin-bottom: 1">&nbsp;</p>
<p style="margin-top: 1; margin-bottom: 1">In addition, during the two-year term of the proposed CEFF, without the prior written consent of Kingsbridge, we are prohibited from issuing securities that are, or may become, convertible or exchangeable into shares of common stock where the purchase, conversion or exchange price for such common stock is determined using a floating or otherwise adjustable discount to the market price of the common stock (including pursuant to an equity line or other financing that is substantially similar to an equity line with an investor other than Kingsbridge) during the two-year term of our agreement with Kingsbridge. In the past, we met our capital needs through the sale of preferred stock and convertible notes which had floating price features. We may have difficulty raising capital if Kingsbridge does not consent to our use of such securities in the future. If we are unable to raise capital from Kingsbridge or from sources that do not demand a floating price feature, we may 
have to severely curtail our operations, which could cause a significant decrease in the price of our common stock.</p>
<p style="margin-top: 1; margin-bottom: 1">&nbsp;</p>
<p style="margin-top: 1; margin-bottom: 1"><b>Two
customers collectively accounted for more than half of our net revenues in
fiscal 2004 and we continue to be dependent on a few large customers. </b></p>
<p style="margin-top: 1; margin-bottom: 1">&nbsp;</p>
<p style="margin-top: 1; margin-bottom: 1">For fiscal 2004, ADS, Inc. accounted for 47% of
our revenues and General Dynamics, Armaments and Technical Products, Inc., or
GD-ATP, accounted for 11% of our revenues.&nbsp;Both of these customers distributed products they purchased from us to
end users. &nbsp;GD-ATP is no longer a
distributor for our products.&nbsp;&nbsp;ADS has
the right to cease doing business with us at any time.&nbsp;&nbsp;If that were to occur,
due to loss of demand for our products from their customers, our net revenues
could decline substantially. Any such decline could result in us incurring net
losses, increasing our accumulated deficit and causing us to need to raise additional capital
to fund our operations. </p>
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<p style="margin-top: 1; margin-bottom: 1"><b>We must
expand our customer base in order to grow our business. </b></p>
<p style="margin-top: 1; margin-bottom: 1">&nbsp;</p>
<p style="margin-top: 1; margin-bottom: 1">To grow our business, we must fulfill orders
from our existing customers, obtain additional orders from our existing
customers, develop relationships with new customers and obtain and fulfill
orders from new customers. We cannot guarantee that we will be able to increase
our customer base. Further, even if we do obtain new customers, we cannot
guarantee that those customers will purchase from us enough quantities of our
product or at product prices that will enable us to recover our costs in
acquiring those customers and fulfilling those orders. Whether we will be able
to sell more of our products will depend on a number of factors, including: </p>

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<ul>
 <li>our ability to manufacture reliable products that have the features that are
     required by our customers;<br>
&nbsp;</li>
 <li>our ability to expand relationships with existing customers and to develop
     relationships with new customers that will lead to additional orders for
     our products;<br>
&nbsp;</li>
 <li>our ability to develop and expand new markets for directed sound products; and<br>
&nbsp;</li>
 <li>our ability to develop international product distribution directly or through
     strategic partners.</li>
</ul>

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avoid'><b><Font style='font-size:10.0pt'>The
growth of our Government Group revenues is materially dependent 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:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:lines-together;page-break-after:avoid'>&nbsp;</p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:lines-together;font-size: 10.0pt;font-family:"Times New Roman";layout-grid-mode:line'><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Although our LRAD products are designed to be used by both government and commercial customers, our LRAD products have to date been predominately sold for government use. Within the Government Group, our largest customer is a reseller of our products to end users in various branches of the military such as the U.S. Navy, U.S. Marine Corps, U.S. Army and the Department of Homeland Security. We have only recently achieved significant sales of LRAD products, and the product has not yet been widely accepted in the government market. Furthermore, the force protection and emergency response market is itself an emerging market which is changing rapidly. 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, and we may fail to achieve our sales projections.</FONT></p>

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<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:lines-together;font-size: 10.0pt;font-family:"Times New Roman";layout-grid-mode:line'><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Perceptions that long range hailing devices are unsafe or may be used in an abusive manner may hurt sales of our LRAD products which could cause our revenues to decline.</STRONG></FONT></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:lines-together;font-size: 10.0pt;font-family:"Times New Roman";layout-grid-mode:line'>&nbsp;</p>

<p style='margin:1 0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:lines-together;font-size: 10.0pt;font-family:"Times New Roman";layout-grid-mode:line'><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Potential customers for our LRAD products, including government, military and 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. These claims or perceptions could cause our product sales to decline. In addition, if these agencies have these perceptions, it will be difficult for us to grow our customer base beyond these markets. These factors could reduce future revenues, adversely affecting our financial condition and results of operations.</FONT></p>

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<p style="margin-top: 1; margin-bottom: 1"><b>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. </b></p>
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<p style="margin-top: 1; margin-bottom: 1">Our HSS, NeoPlanar 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 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 products have been limited to date and we cannot guarantee
significant revenues in the future. The development and introduction of our
products took longer than anticipated by management and the introduction of new
products could also be subject to delays. Customers may not wait for newer
versions of existing products or new products and may elect to purchase
products from competitors. We experienced quality control problems with some of
our initial commercial HSS units, and we may not be able to resolve future
similar 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. </p>
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<p style="margin-top: 1; margin-bottom: 1"><b>Our products have never been produced in quantity, and we may incur significant and unpredictable warranty costs as these products are mass produced.</b></p>
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<p style="margin-top: 1; margin-bottom: 1">None of our products has
been produced in sufficient quantities to be considered mass produced. Our
technologies 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.</p>
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<p style="margin-top: 1; margin-bottom: 1">In fiscal 2003, due to performance failures of
components in some of our first generation of HSS systems, we agreed to
voluntarily replace emitters on an estimated 700 HSS Generation I units. At
September 30, 2004, we had a warranty reserve of $331,917, of which $186,454 was
reserved for this replacement program. During fiscal 2004, we incurred warranty
expense of $145,463 and we
reduced our warranty reserve by $43,792 for products that were no longer under
warranty. We also applied $89,254 of incurred costs against the special reserve
for HSS Generation I units.&nbsp;&nbsp;Future
warranty costs could further adversely affect our financial position, results
of operations and business prospects.&nbsp;The failure rate of our latest HSS Generation
III may not be reduced to acceptable levels.</p>


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<p style='margin:0in;font-family:Times;color:black'><b>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. </b></p>

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<p style="margin-top: 1; margin-bottom: 1">All of our fiscal 2004 revenues were
generated from our sound proprietary reproduction technologies, and we expect
these to be the source of substantially all of our future revenues. Revenues
from our sound proprietary 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:</p>


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<ul>
 <li>our ability to develop and supply sound reproduction components to customers,
     distributors or OEMs or to license our technologies;</li>
 <li>market acceptance of and changes in demand for our products or products of our customers;</li>
 <li>gains or losses of significant customers, distributors or strategic relationships;</li>
 <li>unpredictable volume and timing of customer orders;</li>
 <li>the availability, pricing and timeliness of delivery of components for our products and OEM products;</li>
 <li>fluctuations in the availability of manufacturing capacity or manufacturing yields and
     related manufacturing costs;</li>
 <li>the timing of new technological advances, product announcements or introductions by us, by OEMs or licensees and by our competitors;</li>
 <li>product obsolescence and the management of product transitions and inventory;</li>
 <li>unpredictable warranty costs associated with new product models;</li>
 <li>production delays by customers, distributors, OEMs or by us or our suppliers;</li>
 <li>seasonal fluctuations in sales;</li>
 <li>the conditions of other industries, such as military and commercial industries, into which our technologies may be licensed;</li>
 <li>general consumer electronics industry conditions, including changes in demand and
     associated effects on inventory and inventory practices;</li>
 <li>general economic conditions that could affect the timing of customer orders and
     capital spending and result in order cancellations or rescheduling; and</li>
 <li>general political conditions in this country and in various other parts of the
     world that could affect spending for the products that we offer.</li>
</ul>

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 <p style="margin-top: 1; margin-bottom: 1">Some or all of these factors could adversely
affect demand for our products or technologies, and therefore adversely affect
our future operating results.<br>
&nbsp;</p>
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<p style='margin:1 0in;font-family:Times;color:black'>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. </p>

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<p style='margin:0in;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
page-break-after:avoid'><b>Our expenses may vary
from period to period, which could affect quarterly results and our stock
price. </b></p>

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<p style='margin:1 0in;font-family:Times;color:black'>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:&nbsp; </p>

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  <ul>
    <li>the timing and extent of our research and development efforts;</li>
    <li>investments and costs of maintaining or protecting our intellectual property;</li>
    <li>the extent of marketing and sales efforts to promote our products and technologies;</li>
    <li>the timing of personnel and consultant hiring; and</li>
    <li>the cost of settling legal disagreements.</li>
</ul>

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</div>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
page-break-after:avoid'><b><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
page-break-after:avoid'>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
page-break-after:avoid'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;
font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
page-break-after:avoid'><b><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
page-break-after:avoid'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
page-break-after:avoid'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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 well established markets. As
a result, our technologies, even if successful, may become obsolete before we
recoup our investment. </Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;
font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:10.0pt;font-family:"Times New Roman";font-weight:bold;'>Our competitive position will be
seriously damaged if we cannot obtain patent protection for important&nbsp;&nbsp;differentiating aspects of our products or
otherwise protect intellectual property rights in our technology. </p>

<p style='margin:0in;font-size:10.0pt;font-family:"Times New Roman";font-weight:bold;'>&nbsp;</p>

<p style='margin:0in;font-size:10.0pt;font-family:"Times New Roman";font-weight:bold;font-weight:normal'>We rely on a combination of contracts and trademark, patent and trade secret laws to establish and protect our proprietary rights in our technology. However, we may not be able to prevent misappropriation of our intellectual property, our competitors may be able to independently develop and the agreements we enter into may not be enforceable.
<br>
&nbsp;</p>

 <Font style='font-size:10.0pt; font-family:Symbol' size="2">

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  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>

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</font></font></font></font>

<p style='margin:0in;font-size:10.0pt;font-family:"Times New Roman";font-weight:bold;font-weight:normal'>Our success, in part, depends on our ability to obtain and enforce intellectual property protection for our technology, particularly our patents.&nbsp;&nbsp;There is no guarantee any patent will issue on any patent application that we have filed or may file. Claims allowed from existing or pending patents may not be of sufficient scope or strength to protect the economic value of our technologies.&nbsp;Further, any patent that we may obtain will expire, and it is possible that it may be challenged, invalidated or circumvented. If we do not secure and maintain patent protection for our technology and products, our competitive position will be significantly harmed because it will be much easier for competitors to sell products similar to ours. Alternatively, a competitor may independently develop or patent technologies that are substantially equivalent to or superior to our technology.&nbsp;&nbsp;For exampl
e, patent protection on our LRAD product is limited, and we may not be able to prevent others from introducing products with similar functionality.&nbsp;&nbsp;If this happens, any patent that we may obtain may not provide protection and our competitive position could be significantly harmed. </p>

<p style='margin:0in;font-size:10.0pt;font-family:"Times New Roman";font-weight:bold;'>&nbsp;</p>

<p style='margin:0in;font-size:10.0pt;font-family:"Times New Roman";font-weight:bold;font-weight:normal'>As we expand our product line or develop new uses for our products, these products or uses may be outside the protection provided by our current patent applications and other intellectual property rights. In addition, if we develop new products or enhancements to existing products we cannot assure you that we will be able to obtain patents to protect them. Even if we do receive patents for our existing or new products, these patents may not provide meaningful protection. In some countries outside of the United States where our products can be sold or licensed, patent protection is not available. Moreover, some countries that do allow registration of patents do not provide meaningful redress for violations of patents. As a result, protecting intellectual property in these countries is difficult and our competitors may successfully sell products in those countries that have functions and features that infri
nge on our intellectual property.
<br>
&nbsp;</p>

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

</font>

<p style='margin:0in;font-size:10.0pt;font-family:"Times New Roman";font-weight:bold;font-weight:normal'>We may initiate claims or litigation against third parties in the future for infringement of our proprietary rights or to determine the scope and validity of our proprietary rights or the proprietary rights of our competitors. These claims could result in costly litigation and divert the efforts of our technical and management personnel. As a result, our operating results could suffer and our financial condition could be harmed. </p>

<p style='margin:0in;font-size:10.0pt;font-family:"Times New Roman";font-weight:bold;'>&nbsp;</p>

<p style='margin:0in;font-size:10.0pt;font-family:"Times New Roman";font-weight:bold;'>Our competitive position will be
seriously damaged if our products are found to infringe on the intellectual
property rights of others. </p>

<p style='margin:0in;font-size:10.0pt;font-family:"Times New Roman";font-weight:bold;'>&nbsp;</p>
<p align="center"><font size="2" face="Times New Roman">- 30 -</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>

<p style='margin:0in;font-size:10.0pt;font-family:"Times New Roman";font-weight:bold;font-weight:normal'>Other companies and our competitors may currently own or obtain patents or other proprietary rights that might prevent, limit or interfere with our ability to make, use or sell our products. As a result, we may be found to infringe the intellectual property rights of others. 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. In the event of a successful claim of infringement against us and our failure or inability to license the infringed technology, our business and operating results could be adversely affected. Any litigation or claims, whether or not valid, could result in substantial costs and diversion of our resources. An adverse result from intellectual property litigation could force us to do one or more of the following: </p>

<ul>
  <li>

<p style='font-size:12.0pt;font-family:Times;color:black;margin-top:0in;margin-right:0in;margin-bottom:6.0pt; tab-stops:list .75in;font-size:10.0pt;font-family:"Times New Roman"' align="left">cease selling, incorporating or using products or services that incorporate the challenged intellectual property; </p>

  </li>
  <li>

<p style='font-size:12.0pt;font-family:Times;color:black;margin-top:0in;margin-right:0in;margin-bottom:6.0pt; tab-stops:list .75in;font-size:10.0pt;font-family:"Times New Roman"' align="left">obtain a license from the holder of the infringed intellectual property right, which license may not be available on reasonable terms, if at all; and</p>

  </li>
  <li>

<p style='font-size:12.0pt;font-family:Times;color:black;margin-top:0in;margin-right:0in;margin-bottom:6.0pt; tab-stops:list .75in;font-size:10.0pt;font-family:"Times New Roman"' align="left"><Font style='font:7.0pt "Times New Roman"'>
&nbsp;</Font>redesign products or services that incorporate the disputed technology.</p>

  </li>
</ul>

<p style='margin:0in;font-size:10.0pt;font-family:"Times New Roman";font-weight:bold;font-weight:normal'>If we are forced to take any of the foregoing actions, we could face substantial costs and shipment delays and our business could be seriously harmed. Although we carry general liability insurance, our insurance may not cover potential claims of this type or be adequate to indemnify us for all liability that may be imposed. </p>

<p style='margin:0in;font-size:10.0pt;font-family:"Times New Roman";font-weight:bold;'>&nbsp;</p>

<p style='margin:0in;font-size:10.0pt;font-family:"Times New Roman";font-weight:bold;font-weight:normal'>In addition, it is possible that our customers or end users may seek indemnity from us in the event that our products are found or alleged to infringe the intellectual property rights of others. Any such claim for indemnity could result in substantial expenses to us that could harm our operating results. </p>

<p style='margin:0in;font-size:10.0pt;font-family:"Times New Roman";font-weight:bold;'>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'><b><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Our HSS
technology is subject to government regulation, which could lead to
unanticipated expense or litigation. </Font></b></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;
font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;
font-family:"Times New Roman"'>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.<br>
&nbsp;</Font></p>

 <Font style='font-size:10.0pt; font-family:Symbol' size="2">

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  <Font style='font-size:10.0pt;font-family:"Times New Roman"; color:windowtext' size="2">

 <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' size="2" face="Times New Roman">

  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' size="2">

<Font style='font-size:10.0pt;font-family:"Times New Roman"; color:windowtext'>

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</font>

</font>


 </font></font></font>

</font></font></font></font>
<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

</font>

<p style='font-size:12.0pt;font-family:Times;color:black;margin-bottom:12.0pt;page-break-after:
avoid; margin-left:0in; margin-right:0in; margin-top:0in'><b><Font style='font-size:10.0pt;
font-family:"Times New Roman"'>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:1 0in; font-size:12.0pt;font-family:Times;color:black;page-break-after:
avoid; '><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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.&nbsp;&nbsp;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.&nbsp;&nbsp;We may also be subject to
lawsuits involving allegations of misuse of our products.&nbsp;&nbsp;Our product liability insurance coverage may
be insufficient to pay all such claims.&nbsp;Product liability insurance may become too costly for us or may become
unavailable for us in the future.&nbsp;&nbsp;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.&nbsp;&nbsp;Significant litigation could
also result in a diversion of management&#146;s attention and resources, and
negative publicity.</Font></p>

<p style='margin:1 0in; font-size:12.0pt;font-family:Times;color:black;page-break-after:
avoid; '>&nbsp;</p>

<p style='font-size:12.0pt;font-family:Times;color:black;margin-bottom:1;page-break-after:
avoid; margin-top:1'><b><Font style='font-size:10.0pt;
font-family:"Times New Roman"'>We may not be successful in obtaining the
necessary licenses required for us to sell some of our products abroad. </Font></b></p>

</font>
</font>
<Font style='font-size:10.0pt;font-family:Symbol'>

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  <Font style='color:windowtext' face="Times New Roman" size="2">

<p style='font-family:Times;color:black;margin-bottom:1;margin-top:1'>&nbsp;</p>

</font></font>
  <Font style='color:windowtext' size="2" face="Times New Roman">

<p style='font-family:Times;color:black;margin-bottom:1;margin-top:1'><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Licenses for the export of certain of our products may be required from government agencies in accordance with various statutory authorities, including, for example, the Trading with the Enemy Act of 1917, the Arms Export Control Act of 1976, the Export Administration Act of 1979, or the International Emergency Economic Powers Act, as well as their implementing regulations and executive orders.</FONT></p>

<p style='font-family:Times;color:black;margin-bottom:1;margin-top:1'>&nbsp;</p>

<p style='font-family:Times;color:black;margin-bottom:1;margin-top:1'><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In the case of certain agreements involving equipment or services controlled under the International Traffic in Arms Regulations (ITAR) and sold at specified dollar volumes, the U.S. Department of State must notify Congress at least 15 to 30 days, depending on the intended overseas destination, prior to authorizing these sales. During that time, Congress may take action to block the proposed sale. Based on our current product lines, we do not anticipate the congressional notification requirement to have an immediate impact; however, as our product lines expand, this notification requirement could impact our ability to sell certain controlled products or services in the international market.</FONT></p>

<p style='font-family:Times;color:black;margin-bottom:1;margin-top:1'>&nbsp;</p>

<p style='font-family:Times;color:black;margin-bottom:1;margin-top:1'><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The need for export licenses and, when required, Congressional notification, can introduce a period of delay in our ability to consummate international transactions. Because issuance of an export license is wholly within the discretion of the controlling U.S. government agency, it is possible that, in some circumstances, we may not be able to obtain the necessary licenses for some potential transactions. </FONT></p>

</font><Font style='font-family:Symbol; color:windowtext'>
  <Font style='color:windowtext' face="Times New Roman" size="2">

<p style='font-family:Times;color:black;margin-bottom:1;margin-top:1'>&nbsp;</p>

</font></font>
<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman">
<p align="center"><font size="2" face="Times New Roman">- 31 -</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>

<p style='margin:1 0in;font-size:12.0pt;font-family:"Times New Roman";color:black'><b><Font style='font-size:10.0pt'>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:1 0in;font-size:12.0pt;font-family:"Times New Roman";color:black'><Font style='font-size:10.0pt'>&nbsp;</Font></p>

<p style='margin:1 0in;font-size:12.0pt;font-family:"Times New Roman";color:black'><Font style='font-size:10.0pt'>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>

<ul>
  <li>

<p style='font-size:12.0pt;font-family:"Times New Roman";color:black;tab-stops:.1in .2in .3in .4in list .5in left 313.9pt decimal 375.8pt left 408.2pt decimal 6.4in;font-size:10.0pt; margin-right:0in; margin-top:0in; margin-bottom:3pt'>changes in tariff regulations;</p>

  </li>
  <li>

<p style='font-size:12.0pt;font-family:"Times New Roman";color:black;tab-stops:.1in .2in .3in .4in list .5in left 313.9pt decimal 375.8pt left 408.2pt decimal 6.4in;font-size:10.0pt; margin-right:0in; margin-top:0in; margin-bottom:3pt'>political instability, war, terrorism and other political risks;</p>

  </li>
  <li>

<p style='font-size:12.0pt;font-family:"Times New Roman";color:black;tab-stops:.1in .2in .3in .4in list .5in left 313.9pt decimal 375.8pt left 408.2pt decimal 6.4in;font-size:10.0pt; margin-right:0in; margin-top:0in; margin-bottom:3pt'>foreign currency exchange rate fluctuations;</p>

  </li>
  <li>

<p style='font-size:12.0pt;font-family:"Times New Roman";color:black;tab-stops:.1in .2in .3in .4in list .5in left 313.9pt decimal 375.8pt left 408.2pt decimal 6.4in;font-size:10.0pt; margin-right:0in; margin-top:0in; margin-bottom:3pt'>establishing and maintaining relationships with local distributors and dealers;</p>

  </li>
  <li>

<p style='font-size:12.0pt;font-family:"Times New Roman";color:black;tab-stops:.1in .2in .3in .4in list .5in left 313.9pt decimal 375.8pt left 408.2pt decimal 6.4in;font-size:10.0pt; margin-right:0in; margin-top:0in; margin-bottom:3pt'>lengthy shipping times and accounts receivable payment cycles;</p>

  </li>
  <li>

<p style='font-size:12.0pt;font-family:"Times New Roman";color:black;tab-stops:.1in .2in .3in .4in list .5in left 313.9pt decimal 375.8pt left 408.2pt decimal 6.4in;font-size:10.0pt; margin-right:0in; margin-top:0in; margin-bottom:3pt'>import and export licensing requirements;</p>

  </li>
  <li>

<p style='font-size:12.0pt;font-family:"Times New Roman";color:black;tab-stops:.1in .2in .3in .4in list .5in left 313.9pt decimal 375.8pt left 408.2pt decimal 6.4in;font-size:10.0pt; margin-right:0in; margin-top:0in; margin-bottom:3pt'>compliance with a variety of foreign laws and regulations, including unexpected changes in taxation and regulatory requirements;</p>

  </li>
  <li>

<p style='font-size:12.0pt;font-family:"Times New Roman";color:black;tab-stops:.1in .2in .3in .4in list .5in left 313.9pt decimal 375.8pt left 408.2pt decimal 6.4in;font-size:10.0pt; margin-right:0in; margin-top:0in; margin-bottom:3pt'>greater difficulty in safeguarding intellectual property than in the U.S.; and</p>

  </li>
  <li>

<p style='font-size:12.0pt;font-family:"Times New Roman";color:black;tab-stops:.1in .2in .3in .4in list .5in left 313.9pt decimal 375.8pt left 408.2pt decimal 6.4in;font-size:10.0pt; margin-right:0in; margin-top:0in; margin-bottom:3pt'>difficulty in staffing and managing geographically diverse operations.</p>

  </li>
</ul>

<p style='margin:0in;font-size:12.0pt;font-family:"Times New Roman";color:black;'><Font style='font-size:10.0pt'>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:0in;font-size:12.0pt;font-family:"Times New Roman";color:black;'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<Font style='font-size:10.0pt'>&nbsp;</Font></p>

<p style='margin:0in;font-size:10.0pt;font-family:"Times New Roman";font-weight:bold;mso-pagination:widow-orphan lines-together;
page-break-after:avoid'>Commercialization of our proprietary 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 proprietary sound technologies and products. </p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
page-break-after:avoid'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
page-break-after:avoid'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>An
important part of 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 proprietary sound technologies. </Font></p>

<Font style='font-size:10.0pt; font-family:Symbol' size="2">

  <Font style='font-size:10.0pt;font-family:"Times New Roman"; color:windowtext' size="2">

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman">

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;
font-family:"Times New Roman"'>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, </Font>
<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'><Font style='font-size:10.0pt;
font-family:"Times New Roman"'>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></font></p>
<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

</font></font>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
page-break-after:avoid'>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
page-break-after:avoid'><b><Font style='font-size:10.0pt;font-family:"Times New Roman"'>We are dependent on
third party manufacturers. </Font></b></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
page-break-after:avoid'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;
font-family:"Times New Roman"'>We do not have the capacity to manufacture all
of our products internally and we are therefore dependent on third party manufacturers.&nbsp;&nbsp;At present, we manufacture NeoPlanar and
SoundCluster internally only in small quantities and would need to outsource
our manufacturing if sales of these products were to increase significantly.&nbsp;&nbsp;In addition, we established a manufacturing
relationship with Pemstar, Inc. in fiscal 2004 to manufacture our LRAD and HSS
products.&nbsp;&nbsp;We do not have a formal written agreement with Pemstar. Pemstar,
or any other contract manufacturing partner,
may not be able or willing to manufacture products for us in the quantities and
at the level of quality that we require. If we need
to seek additional third party manufacturers for our products, we may not be
able to obtain acceptable replacement manufacturing sources on a timely basis.
An extended interruption in the supply of our products could result in a
substantial loss of sales. In addition, any actual or perceived degradation of
product quality as a result of our reliance on third party manufacturers may
have an adverse effect on sales or result in increased product returns and
buybacks.&nbsp;&nbsp;Failure to maintain quality
contract manufacturing could reduce future revenues, adversely affecting
financial condition and results of operations.</Font></p>

<p style='margin:0in;font-size:10.0pt;font-family:"Times New Roman";font-weight:bold;'><Font style='color:black'>&nbsp;</Font></p>

<p style='margin:0in;font-size:10.0pt;font-family:"Times New Roman";font-weight:bold;'><Font style='color:black'>We rely on
outside suppliers to provide a large number of components incorporated in our
products.</Font></p>

<p style='margin:0in;font-size:10.0pt;font-family:"Times New Roman";font-weight:bold;'><Font style='color:black'>&nbsp;</Font></p>

<p style='margin:0in;font-size:10.0pt;font-family:"Times New Roman";font-weight:bold;'><Font style='color:black;font-weight:
normal'>Our products have a large number of components produced by outside
suppliers.&nbsp;&nbsp;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.&nbsp;&nbsp;In particular, we depend on
our HSS piezo-film supplier to provide expertise and materials used in our
proprietary HSS emitters.&nbsp;&nbsp;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:0in;font-size:10.0pt;font-family:"Times New Roman";font-weight:bold;'><Font style='color:black;font-weight:
normal'>&nbsp;</Font></p>
<p align="center"><font size="2" face="Times New Roman">- 32 -</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:"Times New Roman";color:black;'><b><Font style='font-size:10.0pt'>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:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><b><Font style='font-size:10.0pt;font-family:"Times New Roman";layout-grid-mode:line'>&nbsp;</Font></b></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
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:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman";
layout-grid-mode:line'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>
<Font style='font-size:10.0pt;font-family:"Times New Roman"; font-weight:700'>
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></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
Our Government Group 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>
<ul>
  <li>
<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
include provisions that allow the government agency to terminate the contract without penalty under some circumstances;&nbsp;&nbsp;</p>
  </font><Font style='font-size:10.0pt;font-family:Symbol;layout-grid-mode:line'>
  <li>
<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
be subject to purchasing decisions of agencies that are subject to political influence;&nbsp;&nbsp;</p>
  </li>
  <li>
<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
contain onerous procurement procedures; and&nbsp;&nbsp;</p>
  </li>
  <li>
<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
be subject to cancellation if government funding becomes unavailable.</p>
  </li>
</ul>
<p>
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.</p>
<Font style='font-size:10.0pt; color:windowtext' face="Times New Roman" size="2"><b><p style="margin-top: 1; margin-bottom: 1">
If our key employees do
not continue to work for us, our business will be harmed because competition
for replacements is intense. </b></p>
<p>Our
performance is substantially dependent on the performance of our executive
officers and key technical employees, including Elwood G. Norris, our Chairman,
and Kalani Jones, our President and Chief Operating Officer. We are dependent
on our ability to retain and motivate high quality personnel, especially highly
skilled technical personnel. Our future success and growth also depends 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. </p>
<p style="margin-top: 1; margin-bottom: 1">We may not address
successfully the problems encountered in connection with any potential future
acquisitions. <br>
&nbsp;</p>
<p style="margin-top: 1; margin-bottom: 1">

 <Font style='font-size:10.0pt;font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

 <Font style='font-size:10.0pt; color:windowtext; font-family:Times New Roman; layout-grid-mode:line' face="Times New Roman" size="2">
We expect to continue to consider opportunities to acquire or make investments
in other technologies, products and businesses that could enhance our
capabilities, complement our current products or expand the breadth of our
markets or customer base. We have limited experience in acquiring other
businesses and technologies. Potential and completed acquisitions and strategic
investments involve numerous risks, including:
</font>
</font></p>
</font>
<ul>
<li>
<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
problems assimilating the purchased technologies, products or business operations;</p>
</font><li>
<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
problems maintaining uniform standards, procedures, controls and policies;&nbsp;&nbsp;</p>
</font><li>
<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
unanticipated costs associated with the acquisition;</p>
</font><li>
<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
diversion of management&#146;s attention from our core business;</p>
</font><li>
<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
adverse effects on existing business relationships with suppliers and customers;</p>
</font><li>
<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
risks associated with entering new markets in which we have no or limited prior experience;</p>
</font><li>
<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
potential loss of key employees of acquired businesses; and</p>
</font><li>
<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
increased legal and accounting costs as a result of the newly adopted rules and regulations related to the Sarbanes-Oxley Act of 2002.</font></p>
</ul>
 <Font style='font-size:10.0pt; color:windowtext; font-family:Times New Roman; layout-grid-mode:line' face="Times New Roman" size="2">
If we fail to properly evaluate and execute acquisitions and strategic
investments, our management team may be distracted from our day-to-day
operations, our business may be disrupted and our operating results may suffer.
In addition, if we finance acquisitions by issuing equity or convertible debt
securities, our stockholders would be diluted.
</font>
<p align="center"><font size="2" face="Times New Roman">- 33 -</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>

 <p>
 <Font style='font-size:10.0pt; color:windowtext; font-family:Times New Roman; layout-grid-mode:line' face="Times New Roman" size="2"><b>
We are subject to
increased costs as a result of newly adopted accounting and SEC regulations.</b></Font></p>
<Font style='font-size:10.0pt; color:windowtext; font-family:Times New Roman; layout-grid-mode:line' face="Times New Roman" size="2">
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, our management will
be required by the end of fiscal 2005 to perform an evaluation of our internal
controls over financial reporting and have our independent auditor attest to
that evaluation. Compliance with these requirements is expected to be expensive
and time consuming. If we fail to timely complete this evaluation, or if our
independent registered public accounting firm cannot timely attest to our
evaluation, we could be subject to regulatory scrutiny and a loss of public
confidence in our internal controls.
</font></p>
 <Font style='font-size:10.0pt; color:windowtext; font-family:Times New Roman; layout-grid-mode:line' face="Times New Roman" size="2">
In designing and evaluating our internal controls over financial reporting, we
recognize that any internal control or procedure, no matter how well designed
and operated, can provide only reasonable assurance of achieving desired control
objectives, and management is required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures. No system of internal controls can
be designed to provide absolute assurance of effectiveness and any material
failure of internal controls over financial reporting could materially impact
our reported financial results and the market price of our stock could
significantly decline. In addition, adverse publicity related to a material
failure of internal controls over financial reporting would have a negative
impact on our reputation and business.<br>
&nbsp;</Font></font><Font style='font-size:10.0pt; font-family:Symbol' size="2"><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'><Font style='font-size:10.0pt;font-family:"Times New Roman"; color:windowtext' size="2"><Font style='font-size:10.0pt;font-family:Symbol; color:windowtext' face="Times New Roman"><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman"><Font style='font-size:10.0pt; font-family:Symbol' size="2"><Font style='font-size:10.0pt;font-family:"Times New Roman"; color:windowtext' size="2"><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman"><Font style='font-size:10.0pt;font-family:"Times New Roman"; layout-grid-mode:line'><Font style='font-size:10.0pt; font-family:Symbol' size="2"><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'><Font style='font-size:10.0pt;font-family:Symbol; color:windowtext' face="Times New Roman" size="2"><Font style='font-size:10.0pt; color:windowtext; f
ont-family:Symbol' face="Times New Roman"><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' size="2"><Font style='font-size:10.0pt;font-family:Symbol; color:windowtext' face="Times New Roman" size="2"><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' size="2" face="Times New Roman"><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2"><Font style='font-size:10.0pt; font-family:Symbol; layout-grid-mode:line' size="2"><Font style='font-size:10.0pt;font-family:Symbol; color:windowtext' face="Times New Roman" size="2"><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' size="2" face="Times New Roman"><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2"><Font style='font-size:10.0pt;font-family:"Times New Roman"; layout-grid-mode:line; color:windowtext' face="Times New Roman" size="2"><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times N
ew Roman" size="2"><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2"><Font style='font-size:10.0pt;font-family:"Times New Roman"'></font></font></font></font></font></font></font></font></font></font></font></font></font></font></font></font></font></font></font></font></font></font></font></font><Font style='font-size:10.0pt;font-family:"Times New Roman"; color:windowtext' size="2"><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman"><Font style='font-size:10.0pt;font-family:"Times New Roman"; color:windowtext' size="2"><Font style='font-size:10.0pt;font-family:"Times New Roman"; layout-grid-mode:line; color:windowtext' face="Times New Roman"><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' size="2"><Font style='font-size:10.0pt; color:windowtext; font-family:Symbol' face="Times New Roman" size="2"><Font style='font-size:10.0pt;font-family:"Times New Roman"; color:windowtext' size="2"><Font style='f
ont-size:10.0pt;font-family:"Times New Roman"; color:windowtext' size="2" face="Times New Roman"><Font style='font-size:10.0pt; font-family:Symbol; layout-grid-mode:line; color:windowtext' size="2" face="Times New Roman"><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2"></font></font></font></font></font></font></font></font></font></font></font></font><Font style='font-size:10.0pt; color:windowtext' face="Times New Roman"><p style="margin-top: 1; margin-bottom: 1"><b>Changes in
stock option accounting rules may adversely impact our reported operating
results prepared in accordance with generally accepted accounting principles,
our stock price and our competitiveness in the employee marketplace.<br>
&nbsp;</b></p>

 </font>

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman">

<Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">

<p style="margin-top: 1; margin-bottom: 1">Technology companies in general and our company
in particular have a history of depending upon and using broad based employee
stock option programs to hire, incentivize and retain employees in a
competitive marketplace. Any changes requiring that we record compensation
expense in the statement of operations for employee stock options using the
fair value method could have a significant negative effect on our reported
results. On March 31, 2004, the Financial Accounting Standards Board (FASB)
issued an Exposure Draft, Share-Based Payment: an amendment of FASB Statements
No. 123 and 95, which would require a company to recognize, as an expense, the
fair value of stock options and other stock-based compensation to employees.
The Exposure Draft set an effective date for public companies of fiscal years
beginning after December 15, 2004. Currently, we do not recognize compensation
expense for stock options, other than to non-employees or upon extensions of
time for certain terminated employees related to black-out periods. Such a
change would result in lower reported earnings, which may negatively impact our
future stock price. In addition, such a change could impact our ability to
utilize broad based employee stock plans to reward employees and could result
in a competitive disadvantage to us in the employee marketplace.<br>
&nbsp;</p>

 <Font style='font-size:10.0pt; font-family:Symbol' size="2">

  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>

  <Font style='font-size:10.0pt;font-family:"Times New Roman"; color:windowtext' size="2">
<Font style='font-size:10.0pt;font-family:Symbol; color:windowtext' face="Times New Roman">

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman">

<Font style='font-size:10.0pt; font-family:Symbol' size="2">

  <Font style='font-size:10.0pt;font-family:"Times New Roman"; color:windowtext' size="2">

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman">

<Font style='font-size:10.0pt;font-family:"Times New Roman"; layout-grid-mode:line'>

 <Font style='font-size:10.0pt; font-family:Symbol' size="2">

  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>

<Font style='font-size:10.0pt;font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

<Font style='font-size:10.0pt; color:windowtext; font-family:Symbol' face="Times New Roman">

<Font style='font-size:10.0pt; font-family:Symbol' size="2">

  <Font style='font-size:10.0pt;font-family:"Times New Roman"; color:windowtext' size="2">
<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman">

  <Font style='font-size:10.0pt;font-family:"Times New Roman"; color:windowtext' size="2">
<Font style='font-size:10.0pt;font-family:"Times New Roman"; layout-grid-mode:line; color:windowtext' face="Times New Roman">

<Font style='font-size:10.0pt; font-family:Symbol' size="2">

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<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

</font>

 </font>

</font></font></font></font></font></font>

 </font>

</font>

</font></font></font></font></font></font></font></font></font></font></font>

<p style="margin-top: 1; margin-bottom: 1"><b>We may
issue preferred stock in the future, and the terms of the preferred stock may
reduce the value of your common stock.<br>
&nbsp;</b></p>

 </font>

<Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">

<p style="margin-top: 1; margin-bottom: 1">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 offerings 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.<br>
&nbsp;</p>


 </font>


<font size="2" face="Times New Roman">

</font>

<Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">

<p style="margin-top: 1; margin-bottom: 1"><b>We may
issue additional common stock in the future, including shares under our
Committed Equity Financing Facility, and this stock may reduce the
value of your common stock.<br>
&nbsp;</b></p>

 </font>

<Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">

<p style="margin-top: 1; margin-bottom: 1">As a result of the CEFF or other
financings, we may issue additional shares of common stock without further
action by our shareholders. Moreover, although the issuance of our common stock
under the CEFF will have no effect on the rights or privileges of existing
holders of common stock, the economic and voting interests of each stockholder
will be diluted as a result of such issuances. Although the number of shares of
common stock that stockholders presently own will not decrease, such shares will
represent a smaller percentage of our total shares that will be outstanding
after such events. If we satisfy the conditions that allow us to draw down the
entire $25 million available under the CEFF, and we choose to do so, then
generally, as the market price of our common stock decreases, the number of
shares we will have to issue upon each draw down on the CEFF increases, to a
maximum of 3,684,782 shares we may issue without shareholder approval. Drawing
down on the CEFF when the price of our common stock is decreasing will have an
additional dilutive effect to your ownership percentage and may result in
additional downward pressure on the price of our common stock.<br>
&nbsp;</p>

 </font>

<Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">
<p align="center"><font size="2" face="Times New Roman">- 34 -</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>

<p style="margin-top: 1; margin-bottom: 1"><b>Our Series D and Series E Preferred Stock
financings may result in dilution to our common stockholders.&nbsp;&nbsp;The holders of Series D and Series E
Preferred Stock have a liquidation preference over holders of our common stock,
and will receive more common shares on conversion if the market price of our
common stock declines.<br>
&nbsp;</b></p>

 </font>

<Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">

<p style="margin-top: 1; margin-bottom: 1">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.<br>
&nbsp;</p>

 </font>

<Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">
<p style="margin-top: 1; margin-bottom: 1">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, 2004, the outstanding 50,000
shares of Series D Preferred Stock were convertible into an aggregate of 127,222
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.&nbsp;&nbsp;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. </p>
<p>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.&nbsp;&nbsp;The conversion rate cannot however be lower
than $2.00. As of September 30, 2004, the 233,250 outstanding shares of Series
E Preferred Stock were convertible into an aggregate of 786,473 common shares.
In addition, the Series E Preferred Stock purchasers received warrants to
purchase 1.5 shares of common stock for each share of Series D Preferred Stock
purchased.&nbsp;&nbsp;The exercise price of the
warrant is $3.25 per share, but is subject to reduction if we sell securities
for less than the effective price of $3.25 per share.</p>


<p>In the event of a sale or liquidation of our company, or in the event of
certain mergers where our company is not the surviving company, the holders of
Series D and Series E Preferred Stock will be entitled to a liquidation preference
equal to their original purchase price plus an accretion of 6% per annum, in
preference to any payments on liquidation to be made to the common stockholders.&nbsp;&nbsp;As of September 30, 2004, the
amount of this liquidation preference was $3,128,500.</p>

<p>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 beyond specific levels.&nbsp;&nbsp;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.&nbsp;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.&nbsp;&nbsp;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.&nbsp;&nbsp;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.</p>
<p><b>Our stock price is volatile and may continue to be volatile in the future.</b></p>
<p>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:</p>

<blockquote>
  <ul>
    <li>

<p style='font-size:12.0pt;font-family:Times;color:black;margin-top:4.0pt;margin-right:0in;margin-bottom:0in; margin-bottom:.0001pt;tab-stops:list 48.0pt;font-size:10.0pt;font-family:"Times New Roman"'><Font style='font:7.0pt "Times New Roman"'>
&nbsp;</Font><Font style='font-size:10.0pt;'>our anticipated or actual operating results; </p>

    </font><Font style='font-size:10.0pt;font-family:Symbol'>
    <li>

<p style='font-size:12.0pt;font-family:Times;color:black;margin-top:4.0pt;margin-right:0in;margin-bottom:0in; margin-bottom:.0001pt;tab-stops:list 48.0pt;font-size:10.0pt;font-family:"Times New Roman"'>developments concerning our sound reproduction technologies; </p>

    </li>
    <li>

<p style='font-size:12.0pt;font-family:Times;color:black;margin-top:4.0pt;margin-right:0in;margin-bottom:0in; margin-bottom:.0001pt;tab-stops:list 48.0pt;font-size:10.0pt;font-family:"Times New Roman"'>technological innovations or setbacks by us or our competitors; </p>

    </li>
    <li>

<p style='font-size:12.0pt;font-family:Times;color:black;margin-top:4.0pt;margin-right:0in;margin-bottom:0in; margin-bottom:.0001pt;tab-stops:list 48.0pt;font-size:10.0pt;font-family:"Times New Roman"'>conditions in the consumer electronics market; </p>

    </li>
    <li>

<p style='font-size:12.0pt;font-family:Times;color:black;margin-top:4.0pt;margin-right:0in;margin-bottom:0in; margin-bottom:.0001pt;tab-stops:list 48.0pt;font-size:10.0pt;font-family:"Times New Roman"'>announcements of merger or acquisition transactions;</p>

    </li>
    <li>

<p style='font-size:12.0pt;font-family:Times;color:black;margin-top:4.0pt;margin-right:0in;margin-bottom:0in; margin-bottom:.0001pt;tab-stops:list 48.0pt;font-size:10.0pt;font-family:"Times New Roman"'>changes in personnel within our company; and </p>

    </li>
    <li>

<p style='font-size:12.0pt;font-family:Times;color:black;margin-top:4.0pt;margin-right:0in;margin-bottom:0in; margin-bottom:.0001pt;tab-stops:list 48.0pt;font-size:10.0pt;font-family:"Times New Roman"'>other events or factors and general economic and market conditions.</p>

    </li>
  </ul>
</blockquote>

</font>
  <Font style='font-size:10.0pt;'>

<p>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. </p>
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<p align="center"><font size="2" face="Times New Roman">- 35 -</font></p>

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<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-family:"Times New Roman"'>
<a name="item 7a">Item 7A. Quantitative and Qualitative Disclosures About Market
Risk.</a></Font></p>

</b>

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</font>
<p>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.</p>
<p>We are currently exposed
to some market risk through interest rates, related to our investment of
current cash and cash equivalents. Based on our balance of cash and cash
equivalents of $4.2 million at September 30, 2004, a change of one percent in
interest rate would cause a change in interest income of $42,000. 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.</p>
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<a name="item 8">Item 8. Financial Statements and Supplementary Data.</a></Font></p>

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  </font></font></font>
<p>The financial statements
required by this item begin on page F-1 with the index to financial statements
followed by the financial statements.</p>
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<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-family:"Times New Roman"'>
<a name="item 9">Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.</a></Font></p>

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<p>None</p>

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<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-family:"Times New Roman"'>
<a name="item 9a">Item 9A. Controls and Procedures.</a></Font></p>

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  </font></font></font>
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<Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">

<p>We
maintain disclosure controls and procedures designed to ensure that material
information related to us, including our consolidated subsidiaries, is
recorded, processed, summarized and reported within the time periods specified
in the SEC rules and forms.</p>

</font>

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman">

<Font style='font-size:10.0pt;font-family:Symbol'>
<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;margin-left:.5in'><Font style='font-size:10.0pt;
font-family:"Times New Roman"'>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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
co-principal executive officers 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;or&nbsp;15d-15(e)&nbsp;under
the Securities Exchange Act of 1934). Based upon that evaluation, our
co-principal executive officers 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 style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;margin-left:.5in'><Font style='font-size:10.0pt;
font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;margin-left:.5in'><Font style='font-size:10.0pt;
font-family:"Times New Roman"'>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
significant changes were made in our internal controls over financial reporting
(as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) during our
most recent fiscal quarter that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.</Font></p>

  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' size="2" face="Times New Roman">

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<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in;font-size:10.0pt; font-family:"Times New Roman";font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</p>

</font>
<Font style='font-size:10.0pt;font-family:Symbol;layout-grid-mode:line; color:windowtext' face="Times New Roman">

<p style='margin:0in;font-family:"Times New Roman";color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>
<i>L</i><Font style='font-size:10.0pt;font-family:"Times New Roman"; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2"><i>imitations.</i>
Our management, including our co-principal executive officers and principal
financial officer, does not expect that our disclosure controls or internal
controls over financial reporting will prevent all errors or all instances&nbsp;&nbsp;of
fraud. A control system, no matter how well designed and operated, can provide
only reasonable, not absolute, assurance that the control system'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>.</font></font></font><Font style='font-size:10.0pt;font-family:"Times New Roman"'><br>
&nbsp;</Font></p>

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<b>

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<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-family:"Times New Roman"'>
<a name="item 9b">Item 9B. Other Information.</a></Font></p>

</font></b>

</font>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in;font-size:10.0pt; font-family:"Times New Roman";font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</p>

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On December 23, 2004, we sold
to accredited investors for cash in a private offering an aggregate of
$2,000,000 of unsecured subordinated promissory notes due December 31, 2006.&nbsp;
Interest on these notes accrues at the rate of 8% per year and is due and
payable quarterly in arrears.&nbsp; We are required to use 40% of the net proceeds of
any future equity financing to prepay these notes, including any amounts we
raise pursuant to our Committed Equity Financing Facility, or CEFF.&nbsp; We may also
prepay these notes in our discretion at any time without penalty after June 30,
2005. </p>
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<p class="Normal">In connection with the issuance
of these notes, each purchaser was granted a warrant to purchase 7,500 shares of
our common stock until December 31, 2009 for each $100,000 of notes purchased
(prorated for amounts less than $100,000) such that we issued in the aggregate
warrants exercisable for an aggregate of 150,000 shares of our common stock.&nbsp;
The exercise price of the warrants was $9.28 per share for purchasers who were
directors, officers, employees or consultants of our company, or affiliates of
such persons, and $8.60 per share for other purchasers.&nbsp; Warrants exercisable
for 75,000 shares were issued at each such exercise price.&nbsp; </p>
<p class="Normal">The holders of these warrants
are entitled to be included on any registration statement we file after the
registration statement for the CEFF, subject to customary exceptions and
cut-back rights.</p>
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<p class="Normal">A trust affiliated with Elwood
G. Norris, our Chairman and the beneficial owner of 19.5% of our common stock
before the financing, purchased a note in the principal amount of $500,000 and
received a warrant exercisable for 37,500 shares with an exercise price of $9.28
per share. </p>
<p class="Normal">The securities were offered and
sold without registration under the Securities Act of 1933, in reliance upon the
exemption provided by Section 4(2) of the Securities Act, and Regulation D, Rule
506 thereunder.&nbsp; The securities may not be offered or sold in the United States
absent registration or an applicable exemption from the registration
requirements of the Securities Act.&nbsp; Appropriate legends have been placed on the
notes and the warrants, and appropriate legends will be placed on the common
stock issued upon exercise of the warrants which are not subject to an effective
registration statement for their resale.&nbsp; We sold these securities without an
underwriter.</p>
</font>
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</font>
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<p class="Normal">The foregoing disclosure is
made in lieu of disclosure under Item 1.01 and Item 3.02 on Form 8-K.</p>
<p class="Normal">On December 22, 2004, we
granted inducement stock options to certain of our new employees.&nbsp; These options
were granted without stockholder approval to 6 new non-executive employees as an
inducement material to the individuals' entering into employment with our
company, and the issuances were approved by our Compensation Committee pursuant
to NASDAQ Marketplace Rule 4350(i)(1)(A)(iv).&nbsp; The options are exercisable for
an aggregate of 76,500 shares of common stock with an exercise price of $10.06
per share.&nbsp; Each option has a five year term and generally vests 25% on the first
anniversary of the grant date and then quarterly thereafter for the next 12
quarters, subject to continued employment and other conditions.&nbsp; The foregoing
disclosure is made in lieu of disclosure under Item 1.01 on Form 8-K.</p>
<p class="Normal">On November 16, 2004, we
granted to Carl Gruenler, our Vice President of Government and Force Protection
Systems Group, a five-year stock option under our 2002 Stock Option Plan, to
purchase 75,000 shares of common stock at an exercise price of $6.70 per share.&nbsp;
The option vests over four years, with 25% of the shares vesting on the first
anniversary of the date of grant, and the balance vesting in equal quarterly
installments thereafter.&nbsp; This disclosure is made in lieu of disclosure in
Item 1.01 of Form 8-K.</p>
 </font>
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</font>
<Font style='font-size:10.0pt;font-family:Symbol;layout-grid-mode:line; color:windowtext' face="Times New Roman" size="2">
<p style='margin:0in;font-family:"Times New Roman";color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
On September 9, 2004, Bruce Ehlers, formerly our Vice President, Engineering,
separated from our company. We agreed to pay Mr. Ehlers severance in the amount
of $12,917, representing one month of base salary. We also agreed that Mr.
Ehlers could exercise the vested portion of his stock option, representing 9,375
shares of common stock, until thirty days after Mr. Ehlers is permitted to sell
the underlying shares under the terms of our insider trading policy. In exchange
for these benefits, Mr. Ehlers executed a general release of claims. The
foregoing disclosure is made in lieu of disclosure under Item 1.01 on Form 8-K.</FONT></p>



</font>

<h1  style='margin:0in;text-align:center;font-size:14.0pt;font-family:"Times New Roman";color:black;font-weight:bold;'><Font style='font-family:Times;mso-bidi-font-family:"Times New Roman"'>&nbsp;</Font>
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<h1  style='margin:0in;text-align:center;font-size:14.0pt;font-family:"Times New Roman";color:black;font-weight:bold;'><Font style='font-family:Times;mso-bidi-font-family:"Times New Roman"'>PART
III</Font>
</h1>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

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Certain information required by this Part III is omitted from this 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 2005 (the Proxy Statement).</Font></p>

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<b>&nbsp;</b></p>



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<b>
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<a name="item 10">Item 10. Directors and Executive Officers of the Registrant.</a></Font></p>

</font></font></b>

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<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<h4  style='margin-top:0in;margin-left:0in;font-size:12.0pt;font-family:Times;color:black;font-weight:bold;margin-left:.5in;text-indent:-.5in; font-size:10.0pt;font-family:"Times New Roman"; font-weight:normal'><Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal'>(a)<Font style='font:7.0pt "Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</Font>Executive Officers&#151;See &#8220;Executive Officers&#8221; in Part I, Item 1 hereof.</h4>

<h4  style='margin-top:0in;margin-left:0in;font-size:12.0pt;font-family:Times;color:black;font-weight:bold;margin-left:.5in;text-indent:-.5in; font-size:10.0pt;font-family:"Times New Roman"; font-weight:normal'><Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal'>(b)<Font style='font:7.0pt "Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</Font>Directors---The information required by this Item is incorporated herein by reference to our Proxy Statement.</h4>

<h4  style='margin-top:0in;margin-left:0in;font-size:12.0pt;font-family:Times;color:black;font-weight:bold;margin-left:.5in;text-indent:-.5in;mso-pagination:widow-orphan; font-size:10.0pt;font-family:"Times New Roman"; font-weight:normal'><Font style='font-size:10.0pt;font-family:"Times New Roman";font-weight:normal'>(c)<Font style='font:7.0pt "Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</Font>Audit Committee Financial Expert&#151;The board of directors has determined that Daniel Hunter is an &#8220;audit committee financial expert&#8221; and &#8220;independent&#8221; as defined under applicable SEC and NASDAQ rules.&nbsp;&nbsp;The board&#146;s affirmative determination was based, among other things, upon his over 25 years as a certified public accountant.</h4>
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<h4  style='margin-top:0in;margin-left:0in;font-size:12.0pt;font-family:Times;color:black;font-weight:bold;margin-left:.5in;text-indent:-.5in;mso-pagination:widow-orphan; font-size:10.0pt;font-family:"Times New Roman"; font-weight:normal'><Font style='font-size:10.0pt;font-family:"Times New Roman";font-weight:normal'>(d)<Font style='font:7.0pt "Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</Font>We have adopted a &#8220;Code of Business Conduct and Ethics,&#8221; 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 website at www.atcsd.com.&nbsp;&nbsp;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 disclos
e such amendment or waiver and the reasons therefore on a Form 8-K or on our next periodic report.</font></h4>

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<a name="item 11">Item 11. Executive Compensation.</a></Font></p>

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<a name="item 12">Item 12. Security Ownership of Certain Beneficial Owners and
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<a name="item 13">Item 13. Certain Relationships and Related Transactions.</a></Font></p>

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<a name="item 14">Item 14. Principal Accounting Fees and Services.</a></Font></p>

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<h1  style='margin:0in;text-align:center;font-size:14.0pt;font-family:"Times New Roman";color:black;font-weight:bold;'><Font style='font-family:Times;mso-bidi-font-family:"Times New Roman"'>PART IV</Font>
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<a name="item 15">Item 15. Exhibits, Financial Statement Schedules and Reports
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font-family:"Times New Roman"'>Report of Independent Registered&nbsp;&nbsp;Public
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   <Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'>
   <Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'><Font style='font-size:10.0pt;font-family:"Times New Roman";font-weight:normal'>
  <td valign=top style='width:575;'>
  <p align=left style='margin:0pt;font-size:10.0pt;font-size:10.0pt;'>
  <Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'><Font style='font-size:10.0pt;font-family:"Times New Roman";font-weight:normal'><Font style='font-size:
10.0pt;font-family:"Times New Roman"'>Notes to Financial Statements</Font></p>
  </td>
   </font></font></font>
   <Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'>
   <Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'><Font style='font-size:10.0pt;font-family:"Times New Roman";font-weight:normal'>
  <td valign=top style='width:83;'>
  <p align=right style='margin:0pt;font-size:10.0pt;font-size:10.0pt;'>
  <Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'>
  <Font style='font-size:
10.0pt;font-family:"Times New Roman"; font-weight:normal'>F-14- F-31</Font></p>
  </td>
   </font></font></font>
 </tr>
 <tr>
  <td valign=top style='width:575;'>
  &nbsp;</td>
  <td valign=top style='width:83;'>
  &nbsp;</td>
 </tr>
 <tr>
  <Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'><Font style='font-size:10.0pt;font-family:"Times New Roman";font-weight:normal'>
  <td valign=top style='width:575;'>
  <p align=left style='margin:0pt;font-size:10.0pt;font-size:10.0pt;'>
  <Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'><Font style='font-size:10.0pt;font-family:"Times New Roman";font-weight:normal'><Font style='font-size:
10.0pt;font-family:"Times New Roman"'>Schedule II &#150; Valuation and Qualifying
  Accounts</Font></p>
  </td>
  </font></font>
  <Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'><Font style='font-size:10.0pt;font-family:"Times New Roman";font-weight:normal'>
  <td valign=top style='width:83;'>
  <p align=right style='margin:0pt;font-size:10.0pt;font-size:10.0pt;'>
  <Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'>
  <Font style='font-size:
10.0pt;font-family:"Times New Roman"; font-weight:normal'>F-32</Font></p>
  </td>
  </font></font>
 </tr>
</table>

</font></font>
<p><Font style='font-size:10.0pt; font-weight:700' face="Times New Roman">
Exhibits:&nbsp;</Font></p>

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 <tr>
  <td width=638 colspan=4 valign=top style='width:6.65in;'>
  <p align=left style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>
  <Font style='font-size:10.0pt;font-family:
  "Times New Roman"; font-weight:700'>3.&nbsp;&nbsp;Articles of
  Incorporation and Bylaws</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'><font face="Times New Roman" size="2">&nbsp;</font></p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>
  <font face="Times New Roman" size="2">&nbsp;</font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-family:Palatino;color:black;tab-stops:.5in'>
  <font face="Times New Roman" size="2">&nbsp;</font></p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-family:Palatino;color:black;tab-stops:.5in'>
  <font face="Times New Roman" size="2">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>3.1</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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>
 </table>

 <p align="center"><font size="2" face="Times New Roman">- 38 -</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>


<table border=0 cellspacing=0 cellpadding=0 style='border-collapse:collapse;
 mso-padding-alt:0in 5.4pt 0in 5.4pt'>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>3.1.1
  </Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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 the quarter ended March&nbsp;31, 1997, dated May 13, 1997.</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>3.1.2
  </Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:justify;
  text-justify:inter-ideograph;text-indent:0in;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:
  right;text-indent:0in;tab-stops:.5in'>3.1.3</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:
  .5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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 for the year ended September 30, 1998, dated December 29, 1998.</p>
  </td>
 </tr>
 </table>

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</font>

<table border=0 cellspacing=0 cellpadding=0 style='border-collapse:collapse;
 mso-padding-alt:0in 5.4pt 0in 5.4pt'>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph;
  '>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right;'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:justify;   text-justify:inter-ideograph;text-indent:0in;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:
  right;text-indent:0in;tab-stops:.5in'>3.1.4</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:
  .5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
   <p style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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.</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph;
  '>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right;'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:justify;
  text-justify:inter-ideograph;text-indent:0in;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:
  right;text-indent:0in;tab-stops:.5in'>3.1.5</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:   .5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
    <p style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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, dated May 15, 2002.</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph;
  '>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right;'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:justify;
  text-justify:inter-ideograph;text-indent:0in;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:
  right;text-indent:0in;tab-stops:.5in'>3.1.6</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:
  .5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
    <p style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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, dated December 23, 2002.</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph;
  '>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right;'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:justify;
  text-justify:inter-ideograph;text-indent:0in;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:   right;text-indent:0in;tab-stops:.5in'>3.1.7</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:
  .5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
   <p style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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.</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph;
  '>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right;'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph;
  '>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>3.2</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>Amended and Restated Bylaws of American
  Technology Corporation. Filed as Exhibit 3.1 on Form 10-Q for the quarter ended
  March 31, 2004, dated May 5, 2004.</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=638 colspan=4 valign=top style='width:6.65in;'>
  <p align=left style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>
  <Font style='font-size:10.0pt;font-family:
  "Times New Roman"; font-weight:700'>10.&nbsp;&nbsp;Material
  Contracts</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.1</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Royalty Agreement
  between ATC and Elwood G. Norris dated September 3, 1985.&nbsp;&nbsp;Filed as Exhibit 6.2 on Form 10-SB
  effective August 1, 1994.+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.2</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.2.1</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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 year ended
  September 30, 1996, dated December 13, 1996.+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.3</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Amended and Restated
  Sublease Agreement between ATC and Smiths Industries Aerospace &amp; Defense
  Systems, Inc. as amended, dated September 1, 2000.&nbsp;&nbsp;Filed as Exhibit 10.6.1 on Form 10-K for the year ended
  September 30, 2000, dated October 29, 2000.</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.3.1</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>First Amendment to
  Amended and Restated Sublease Agreement, dated January 1, 2004.&nbsp;&nbsp;Filed as Exhibit 10.1 on Form 10-Q for the
  quarter ended March 31, 2004, dated May 5, 2004.</Font></p>
  </td>
 </tr>
 </table>

<p>&nbsp;</p>
<p align="center"><font size="2" face="Times New Roman">- 39 -</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>

<table border=0 cellspacing=0 cellpadding=0 style='border-collapse:collapse;
 mso-padding-alt:0in 5.4pt 0in 5.4pt'>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 </table>

<table border=0 cellspacing=0 cellpadding=0 style='border-collapse:collapse;
 mso-padding-alt:0in 5.4pt 0in 5.4pt'>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.4</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Employment Agreement
  dated as of September 1, 1997 between ATC and Elwood G. Norris filed as
  Exhibit 10.16 on Form 10-KSB for year ended September 30, 1997, dated
  December 1, 1997.+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.5</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.5.1</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Form of Incentive
  Stock Option Agreement under 1997 Stock Option Plan.*+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.5.2</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Form of Non-Statutory
  Stock Option Agreement under 1997 Stock Option Plan.*+</Font></p>
  </td>
 </tr>
 </table>

 <Font style='font-size:10.0pt; font-family:Symbol' size="2">

<Font style='font-size:10.0pt; font-family:Symbol'>

  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>

  <Font style='font-size:10.0pt;font-family:"Times New Roman"; color:windowtext' size="2">
<Font style='font-size:10.0pt;font-family:Symbol; color:windowtext' face="Times New Roman">

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman">

<Font style='font-size:10.0pt; font-family:Symbol' size="2">

  <Font style='font-size:10.0pt;font-family:"Times New Roman"; color:windowtext' size="2">

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman">

<Font style='font-size:10.0pt;font-family:"Times New Roman"; layout-grid-mode:line'>

 <Font style='font-size:10.0pt; font-family:Symbol' size="2">

  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>

<Font style='font-size:10.0pt;font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

<Font style='font-size:10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext' face="Times New Roman">

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

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</font>

</font>

</font>



<Font style='font-size:10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext' face="Times New Roman">
</font>



</font>

</font></font></font></font></font></font></font></font></font></font></font>
</font>

<table border=0 cellspacing=0 cellpadding=0 style='border-collapse:collapse;
 mso-padding-alt:0in 5.4pt 0in 5.4pt'>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.6</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>2002
  Stock Option Plan.&nbsp;&nbsp;Filed as Exhibit
  99.1 on Form S-8 dated November 18, 2002.+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:justify;
  text-justify:inter-ideograph;text-indent:0in;tab-stops:
  .5in; margin-right:0pt; margin-bottom:0pt'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:   right;text-indent:0in;tab-stops:.5in'>10.6.1</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:.5in; margin-right:0pt; margin-bottom:0pt'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:.5in; margin-right:0pt; margin-bottom:0pt'>Form of Stock Option Grant Notice and Stock Option
  Agreement under 2002 Stock Option Plan.*+</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.7 </Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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).&nbsp;&nbsp;Filed as Exhibit 4.12 on Form 8-K dated
  October 12, 2001.</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.8</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Series D Stock and Warrant Purchase Agreement dated May 3, 2002.&nbsp;&nbsp;Filed as
  Exhibit 10.1 on Form 10-Q for the
  quarter ended March 31, 2002, dated May 15, 2002.</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.8.1</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Amendment No. 1 to Series D Preferred Stock and Warrant Purchase Agreement
  dated July 3, 2002.&nbsp;&nbsp;Filed as Exhibit 10.3 on
  Form 10-Q for the quarter ended June 30, 2002, dated August 14, 2002.</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.9</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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  on Form 10-Q for the quarter ended March 31, 2002, dated May 15, 2002.</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:justify;
  text-justify:inter-ideograph;text-indent:0in;tab-stops:
  .5in; margin-right:0pt; margin-bottom:0pt'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:   right;text-indent:0in;tab-stops:.5in'>10.10</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:.5in; margin-right:0pt; margin-bottom:0pt'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Form of 8% Senior Secured Promissory Note due December
  31, 2003 aggregating $1,500,000 granted to accredited investors (individual
  notes differed as to holder and amount). Filed as Exhibit 4.1 on Form 8-K
  dated October 7, 2002.</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:justify;
  text-justify:inter-ideograph;text-indent:0in;tab-stops:
  .5in; margin-right:0pt; margin-bottom:0pt'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:
  right;text-indent:0in;tab-stops:.5in'>10.10.1</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:.5in; margin-right:0pt; margin-bottom:0pt'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
    <p style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Form of Amendment to 8% Senior Secured Promissory Note. Filed as Exhibit 4.6
  on Form 8-K dated March 6, 2003.</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:justify;   text-justify:inter-ideograph;text-indent:0in;tab-stops:   .5in; margin-right:0pt; margin-bottom:0pt'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:
  right;text-indent:0in;tab-stops:.5in'>10.11</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:.5in; margin-right:0pt; margin-bottom:0pt'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Form of Security Agreement. Filed as Exhibit 4.2 on
  Form 8-K dated October 7, 2002.</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.12</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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  on Form 10-K for
  the year ended September 30, 2002, dated December 23, 2002.</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.13</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Series E Preferred Stock and Warrant Purchase Agreement dated February 28,
  2003. Filed as Exhibit 4.1 on Form 8-K filed on March 6, 2003.</Font></p>
  </td>
 </tr>
 </table>

<p>&nbsp;</p>
<p align="center"><font size="2" face="Times New Roman">- 40 -</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>

<table border=0 cellspacing=0 cellpadding=0 style='border-collapse:collapse;
 mso-padding-alt:0in 5.4pt 0in 5.4pt'>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.14 </Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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).&nbsp;&nbsp;Filed as Exhibit 4.3 on Form 8-K dated
  March 6, 2003.</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
</table>

<table border=0 cellspacing=0 cellpadding=0 style='border-collapse:collapse;
 mso-padding-alt:0in 5.4pt 0in 5.4pt'>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.15</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Employment letter of James M. Irish dated January 27, 2003. Filed as Exhibit
  10.5 on
  Form 10-Q for the quarter ended March 31, 2003, dated May 15, 2003.+</Font></p>
  </td>
 </tr>
</table>

 <Font style='font-size:10.0pt; font-family:Symbol' size="2">

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<Font style='font-size:10.0pt;font-family:Symbol; color:windowtext' face="Times New Roman">

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman">

<Font style='font-size:10.0pt; font-family:Symbol' size="2">

  <Font style='font-size:10.0pt;font-family:"Times New Roman"; color:windowtext' size="2">

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<Font style='font-size:10.0pt;font-family:"Times New Roman"; layout-grid-mode:line'>

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  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>

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<Font style='font-size:10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext' face="Times New Roman">

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

<Font style='font-size:10.0pt;font-family:"Times New Roman"'>

</font>

</font>

</font>



<Font style='font-size:10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext' face="Times New Roman">
</font>



</font>

</font></font></font></font></font></font></font></font></font></font></font>
</font>

<table border=0 cellspacing=0 cellpadding=0 style='border-collapse:collapse;
 mso-padding-alt:0in 5.4pt 0in 5.4pt'>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.16</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Securities
  Purchase Agreement dated July 11, 2003. Filed as Exhibit 4.1 on Form 8-K
  dated July 17, 2003. </Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.17</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Registration
  Rights Agreement dated July 11, 2003. Filed as Exhibit 4.2  on Form 8-K dated
  July 17, 2003. </Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:justify;
  text-justify:inter-ideograph;text-indent:0in;tab-stops:
  .5in; margin-right:0pt; margin-bottom:0pt'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:   right;text-indent:0in;tab-stops:.5in'>10.18</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:.5in; margin-right:0pt; margin-bottom:0pt'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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  on Form 8-K dated July 17, 2003. </p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:justify;
  text-justify:inter-ideograph;text-indent:0in;tab-stops:
  .5in; margin-right:0pt; margin-bottom:0pt'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:
  right;text-indent:0in;tab-stops:.5in'>10.19</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:.5in; margin-right:0pt; margin-bottom:0pt'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>License and Remarketer Agreement between ATC and   General Dynamics Armament and Technical Products, Inc. dated February 14,   2003. Filed as Exhibit 10.27  on Form 10-K for the year ended September 30,   2003, dated December 29, 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. </p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:justify;   text-justify:inter-ideograph;text-indent:0in;tab-stops:   .5in; margin-right:0pt; margin-bottom:0pt'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:
  right;text-indent:0in;tab-stops:.5in'>10.20</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:.5in; margin-right:0pt; margin-bottom:0pt'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
   <p style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>License and Remarketer Agreement between ATC
  and Bath Iron Works Corporation dated February 13, 2003. Filed as Exhibit
  10.28.1 on
  Form 10-K for the year ended September 30, 2003, dated December 29, 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.</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.21</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Assignment
  of License and Remarketer Agreement from Bath Iron Works Corporation to
  General Dynamics Armament and Technical Products, Inc., dated September 23,
  2003. Filed as Exhibit 10.28.2 on Form 10-K for the year ended September 30,
  2003, dated December 29, 2003.</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.22</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Employment
  Agreement of Kalani Jones dated August 28, 2003, as amended. Filed as Exhibit
  10.29  on Form 10-K for the year ended September 30, 2003, dated December 29,
  2003.+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.23</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Employment
  Agreement of Carl Gruenler, as amended. Filed as Exhibit 10.30  on Form 10-K
  for the year ended September 30, 2003, dated December 29, 2003.+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.24</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Form
  of Inducement Grant Notice and Inducement Stock Option Agreement. Filed as
  Exhibit 4.1  on Form 8-K dated September 28, 2004.+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.25</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Table
  of Inducement Grants.*+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.26</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Form
  of Special Stock Option.&nbsp;&nbsp;Filed as
  Exhibit 99.2  on Form S-8 dated November 18, 2002.+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.27</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Employment
  Agreement of Michael Russell. Filed as Exhibit 10.1  on Form 10-Q for the
  quarter ended June 30, 2004, dated August 4, 2004.+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.28</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Inducement
  Grant Notice and Inducement Stock Option Agreement of Michael Russell.*+</Font></p>
  </td>
 </tr>
 </table>

 <Font style='font-size:10.0pt; font-family:Symbol' size="2">

<Font style='font-size:10.0pt; font-family:Symbol'>

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<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman">

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<p align="center"><font size="2" face="Times New Roman">- 41 -</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
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<Font style='font-size:10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext' face="Times New Roman">
<h1  style='margin:0in;text-align:center;font-size:14.0pt;font-family:"Times New Roman";color:black;font-weight:bold;'>&nbsp;</h1>
</font>



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</font></font></font></font></font></font></font></font></font></font></font>
</font>

<table border=0 cellspacing=0 cellpadding=0 style='border-collapse:collapse;
 mso-padding-alt:0in 5.4pt 0in 5.4pt'>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  10.29</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Employment
  Agreement of Joseph A. Zerucha.&nbsp;&nbsp;Filed
  as Exhibit 10.2 on Form 10-Q for the quarter ended December 31, 2003, dated
  February 12, 2004.+</Font></p>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
</table>

<table border=0 cellspacing=0 cellpadding=0 style='border-collapse:collapse;
 mso-padding-alt:0in 5.4pt 0in 5.4pt'>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:left;'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.30</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Separation
  Agreement of Joseph A. Zerucha.&nbsp;&nbsp;Filed
  as Exhibit 10.2 on Form 10-Q for the Form 10-Q for the quarter ended June 30,
  2004, dated August 4, 2004.+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.31</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Employment
  Agreement of Bruce Ehlers.&nbsp;&nbsp;Filed as
  Exhibit 10.1 on Form 10-Q for the quarter ended December 31, 2003, dated
  February 12, 2004.+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.32</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
</font>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>
<Font style='font-size:10.0pt;font-family:Symbol;layout-grid-mode:line; color:windowtext'>

  <Font style='font-size:10.0pt;font-family:"Times New Roman"'>Release
  Agreement of Bruce Ehlers.*+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.33</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Special
  Stock Option with Elwood Norris dated November 13, 2000.*+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.34</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Special
  Stock Option with David Carter dated November 13, 2000.*+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.35</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Special
  Stock Option with Richard Wagner dated November 13, 2000.*+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.36</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Common Stock Purchase Agreement dated December 14, 2004 with Kingsbridge
  Capital Limited. Filed as Exhibit 10.1 on Form 8-K filed December 17, 2004.</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.37</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Registration Rights Agreement dated December 14, 2004 with Kingsbridge Capital
  Limited. Filed as Exhibit 10.2 on Form 8-K filed December 17, 2004. </Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.38</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Warrant dated December 14, 2004 in favor of Kingsbridge Capital Limited. Filed
  as Exhibit 4.1 to Form 8-K filed December 17, 2004. </Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  &nbsp;</td>
  <td width=56 valign=top style='width:41.8pt;'>
  &nbsp;</td>
  <td width=30 valign=top style='width:22.5pt;'>
  &nbsp;</td>
  <td width=535 valign=top style='width:401.4pt;'>
  &nbsp;</td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  &nbsp;</td>
  <td width=56 valign=top style='width:41.8pt;'>

  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' size="2" face="Times New Roman">



  <Font style='font-size:10.0pt; color:windowtext; font-family:Symbol; layout-grid-mode:line' face="Times New Roman">
<Font style='font-size:10.0pt;font-family:Symbol;layout-grid-mode:line; color:windowtext'>

  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.39</Font></p>
</font>
</font>



</font>



  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  &nbsp;</td>
  <td width=535 valign=top style='width:401.4pt;'>

  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' size="2" face="Times New Roman">



  <Font style='font-size:10.0pt; color:windowtext; font-family:Symbol; layout-grid-mode:line' face="Times New Roman">
<Font style='font-size:10.0pt;font-family:Symbol;layout-grid-mode:line; color:windowtext'>

  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Promissory Note and Warrant Purchase Agreement dated December 23, 2004 with
  the purchasers described therein. *+</Font></p>
</font>
</font>



</font>



  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  &nbsp;</td>
  <td width=56 valign=top style='width:41.8pt;'>
  &nbsp;</td>
  <td width=30 valign=top style='width:22.5pt;'>
  &nbsp;</td>
  <td width=535 valign=top style='width:401.4pt;'>
  &nbsp;</td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  &nbsp;</td>
  <td width=56 valign=top style='width:41.8pt;'>

  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' size="2" face="Times New Roman">



  <Font style='font-size:10.0pt; color:windowtext; font-family:Symbol; layout-grid-mode:line' face="Times New Roman">

  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' size="2" face="Times New Roman">

<Font style='font-size:10.0pt;font-family:Symbol;layout-grid-mode:line; color:windowtext' face="Times New Roman">

  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.40</Font></p>
</font>



</font>



</font>



</font>



  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  &nbsp;</td>
  <td width=535 valign=top style='width:401.4pt;'>

  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' size="2" face="Times New Roman">



  <Font style='font-size:10.0pt; color:windowtext; font-family:Symbol; layout-grid-mode:line' face="Times New Roman">
<Font style='font-size:10.0pt;font-family:Symbol;layout-grid-mode:line; color:windowtext'>

  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Form of Unsecured Subordinated Promissory Note. *+</Font></p>
</font>
</font>



</font>



  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  &nbsp;</td>
  <td width=56 valign=top style='width:41.8pt;'>
  &nbsp;</td>
  <td width=30 valign=top style='width:22.5pt;'>
  &nbsp;</td>
  <td width=535 valign=top style='width:401.4pt;'>
  &nbsp;</td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  &nbsp;</td>
  <td width=56 valign=top style='width:41.8pt;'>

  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' size="2" face="Times New Roman">



  <Font style='font-size:10.0pt; color:windowtext; font-family:Symbol; layout-grid-mode:line' face="Times New Roman">

  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' size="2" face="Times New Roman">

  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' size="2" face="Times New Roman">

<Font style='font-size:10.0pt;font-family:Symbol;layout-grid-mode:line; color:windowtext' face="Times New Roman">

  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.41</Font></p>
</font>



</font>



</font>



</font>



</font>



  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  &nbsp;</td>
  <td width=535 valign=top style='width:401.4pt;'>

  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' size="2" face="Times New Roman">



  <Font style='font-size:10.0pt; color:windowtext; font-family:Symbol; layout-grid-mode:line' face="Times New Roman">

  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' size="2" face="Times New Roman">

<Font style='font-size:10.0pt;font-family:Symbol;layout-grid-mode:line; color:windowtext' face="Times New Roman">

  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Form of Warrant. *+</Font></p>
</font>



</font>



</font>



</font>



  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=638 colspan=4 valign=top style='width:6.65in;'>
  <p align=left style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>
  <Font style='font-size:10.0pt;font-family:
  "Times New Roman"; font-weight:700'>23.&nbsp;&nbsp;Consents of
  Experts and Counsel</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'><font face="Times New Roman" size="2">&nbsp;</font></p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>
  <font face="Times New Roman" size="2">&nbsp;</font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-family:Palatino;color:black;tab-stops:.5in'>
  <font face="Times New Roman" size="2">&nbsp;</font></p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0in;font-family:Palatino;color:black;tab-stops:.5in'>
  <font face="Times New Roman" size="2">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>23.1</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:left;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:
  "Times New Roman"'>Consent of BDO Seidman, LLP.*</Font></p>
  </td>
 </tr>
 </table>

<p>&nbsp;</p>

<table border=0 cellspacing=0 cellpadding=0 style='border-collapse:collapse;
 mso-padding-alt:0in 5.4pt 0in 5.4pt'>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=638 colspan=4 valign=top style='width:6.65in;'>
  <p align="center"><font size="2" face="Times New Roman">- 42 -</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>

  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
  page-break-after:avoid'>
  <Font style='font-size:10.0pt;font-family:"Times New Roman"; font-weight:700'>Certifications</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph;
  mso-pagination:widow-orphan lines-together;page-break-after:avoid'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right;mso-pagination:widow-orphan lines-together;
  page-break-after:avoid'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
  page-break-after:avoid'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
  page-break-after:avoid'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph;
  mso-pagination:widow-orphan lines-together;page-break-after:avoid'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right;mso-pagination:widow-orphan lines-together;
  page-break-after:avoid'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>31.1</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
  page-break-after:avoid'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;   page-break-after:avoid;font-size:10.0pt;font-family:"Times New Roman";font-size:10.0pt'><Font style='font-size:10.0pt'>Certification of </Font>Elwood G. Norris,   Co-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.*</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph;
  mso-pagination:widow-orphan lines-together;page-break-after:avoid'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right;mso-pagination:widow-orphan lines-together;
  page-break-after:avoid'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
  page-break-after:avoid'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
  page-break-after:avoid'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph;
  mso-pagination:widow-orphan lines-together;page-break-after:avoid'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right;mso-pagination:widow-orphan lines-together;
  page-break-after:avoid'><Font style='font-size:10.0pt' face="Times New Roman">31.2</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
  page-break-after:avoid'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;   page-break-after:avoid;font-size:10.0pt;font-family:"Times New Roman";font-size:10.0pt'><Font style='font-size:10.0pt'>Certification of </Font>Kalani Jones,   Co-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.*</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>31.3</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>
  <Font style='font-size:10.0pt' face="Times New Roman">Certification of Michael A.
  Russell, 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>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>32.1</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;font-size:10.0pt;   font-family:"Times New Roman";font-size:10.0pt'><Font style='font-size:10.0pt'>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 </Font>Elwood G. Norris and Kalani Jones,   Co-Principal Executive Officers, and   Michael A. Russell, Principal Financial Officer.*</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=638 colspan=4 valign=top style='width:6.65in;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>
  <Font style='font-size:10.0pt' face="Times New Roman">*&nbsp;&nbsp;Filed concurrently herewith</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=638 colspan=4 valign=top style='width:6.65in;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>
  <Font style='font-size:10.0pt' face="Times New Roman">+&nbsp;&nbsp;Management contract or compensatory plan or arrangement.
  Exhibits 10.39, 10.40 and 10.41 are included as a management contract given
  that a trust affiliated with an officer, director and significant stockholder
  purchased a note and received a warrant in connection with that financing and
  is a party to those exhibits.</Font></p>
  </td>
 </tr>
</table>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>
<Font style='font-size:10.0pt' face="Times New Roman">&nbsp;</Font></p>

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>
<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

<Font style='font-size:10.0pt;font-family:"Times New Roman"'>

<p align="center"><font size="2" face="Times New Roman">- 43 -</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
</font>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in;font-size:10.0pt; font-family:"Times New Roman";font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</p>

<BODY><DIV><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>Index to Financial Statements</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>
<DIV>
<HR align=center width="100%" color=#000000 noShade SIZE=2>
</DIV><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV align=left>
<TABLE cellSpacing=0 cellPadding=0 width="100%">
<TR bgColor=#cbdbd1>
<TD vAlign=top align=left width="66%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Report of Independent Registered Public Accounting Firm</FONT></DIV></TD>
<TD vAlign=top align=left width="10%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-2</FONT></DIV></TD></TR>
<TR bgColor=#ffffff>
<TD vAlign=top align=left width="66%">&nbsp;</TD>
<TD vAlign=top align=left width="10%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD vAlign=top align=left width="66%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Balance Sheets as of September 30, 2004 and 2003</FONT></DIV></TD>
<TD vAlign=top align=left width="10%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-3</FONT></DIV></TD></TR>
<TR bgColor=#ffffff>
<TD vAlign=top align=left width="66%">&nbsp;</TD>
<TD vAlign=top align=left width="10%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD vAlign=top align=left width="66%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Statements of Operations for the Years Ended</FONT></DIV></TD>
<TD vAlign=top align=left width="10%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD vAlign=top align=left width="66%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">September 30, 2004, 2003 and 2002</FONT></DIV></TD>
<TD vAlign=top align=left width="10%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-4</FONT></DIV></TD></TR>
<TR bgColor=#cbdbd1>
<TD vAlign=top align=left width="66%">&nbsp;</TD>
<TD vAlign=top align=left width="10%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD vAlign=top align=left width="66%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Statements of Stockholders&#146; Equity (Deficit) for the Years Ended</FONT></DIV></TD>
<TD vAlign=top align=left width="10%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD vAlign=top align=left width="66%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">September 30, 2004, 2003 and 2002</FONT></DIV></TD>
<TD vAlign=top align=left width="10%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-5</FONT></DIV></TD></TR>
<TR bgColor=#ffffff>
<TD vAlign=top align=left width="66%">&nbsp;</TD>
<TD vAlign=top align=left width="10%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD vAlign=top align=left width="66%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Statements of Cash Flows for the Years Ended</FONT></DIV></TD>
<TD vAlign=top align=left width="10%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD vAlign=top align=left width="66%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">September 30, 2004, 2003 and 2002</FONT></DIV></TD>
<TD vAlign=top align=left width="10%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-6</FONT></DIV></TD></TR>
<TR bgColor=#cbdbd1>
<TD vAlign=top align=left width="66%">&nbsp;</TD>
<TD vAlign=top align=left width="10%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD vAlign=top align=left width="66%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Summary of Accounting Policies</FONT></DIV></TD>
<TD vAlign=top align=left width="10%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-7 - F-14</FONT></DIV></TD></TR>
<TR bgColor=#cbdbd1>
<TD vAlign=top align=left width="66%">&nbsp;</TD>
<TD vAlign=top align=left width="10%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD vAlign=top align=left width="66%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notes to Financial Statements</FONT></DIV></TD>
<TD vAlign=top align=left width="10%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-14- F-31</FONT></DIV></TD></TR>
<TR bgColor=#cbdbd1>
<TD vAlign=top align=left width="66%">&nbsp;</TD>
<TD vAlign=top align=left width="10%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD vAlign=top align=left width="66%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Schedule II - Valuation and Qualifying Accounts</FONT></DIV></TD>
<TD vAlign=top align=left width="10%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
  F-32</FONT></DIV></TD></TR>
<TR bgColor=#cbdbd1>
<TD vAlign=top align=left width="66%">&nbsp;</TD>
<TD vAlign=top align=left width="10%">&nbsp;</TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV><BR></DIV>
<DIV>
<TABLE id=PGBRK cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR vAlign=top>
<TD width="100%" colSpan=3>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 18pt" align=right><FONT id=TAB2 style="COLOR: black; LETTER-SPACING: 207pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;</DIV></TD></TR>
<TR>
<TD align=left width="33%"><FONT size=1>&nbsp;</FONT></TD>
<TD align=middle width="34%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">F-1</FONT></TD>
<TD align=right width="33%"><FONT size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD width="100%" colSpan=3><FONT size=1>
<HR style="PAGE-BREAK-AFTER: always" color=black noShade SIZE=1>
</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=HDR cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD vAlign=bottom width="100%">&nbsp;</TD></TR></TABLE></DIV>
<DIV><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>Report of Independent Registered Public Accounting Firm</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>
<DIV>
<HR align=center width="100%" color=#000000 noShade SIZE=4>
<BR></DIV></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">To the Stockholders and Board of Directors<BR></FONT><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">American Technology Corporation<BR></FONT><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">San Diego, California</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">We have audited the accompanying balance sheets of American Technology Corporation as of September 30, 2004 and 2003, 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, 2004. 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></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits 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></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">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, 2004 and 2003, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2004 in conformity with accounting principles generally accepted in the United States of America.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Also, in our opinion, the schedules present fairly, in all material respects, the information set forth therein.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">/s/ BDO SEIDMAN, LLP</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Costa Mesa, California</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">November
  10, 2004, except for Note 14 as to which the date is December 23, 2004.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV valign="top"></DIV>
<DIV><BR></DIV>
<DIV>
<TABLE id=PGBRK cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD vAlign=bottom width="100%" colSpan=3>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT id=TAB2 style="COLOR: black; LETTER-SPACING: 207pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;</DIV></TD></TR>
<TR>
<TD align=left width="33%"><FONT size=1>&nbsp;</FONT></TD>
<TD align=middle width="34%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">F-2</FONT></TD>
<TD align=right width="33%"><FONT size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD style="PAGE-BREAK-AFTER: always" width="100%" colSpan=3><FONT size=1>
<HR style="PAGE-BREAK-AFTER: always" color=black noShade SIZE=1>
</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=HDR cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD vAlign=bottom width="100%">&nbsp;
</TD></TR></TABLE></DIV>
<DIV>
  <TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%" style="border-width:0; ">
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="99%" colSpan=8>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation </STRONG></FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
</TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="99%" colSpan=8>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">BALANCE SHEETS</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
</TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">September 30,</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="12%" colSpan=2>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2004</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="12%" colSpan=2>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2003</FONT></DIV></TD>
</TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">&nbsp;</TD>
</TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>ASSETS</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
</TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Current Assets:</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
</TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Cash</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">4,178,968&nbsp; </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">9,850,358
  &nbsp;</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%" bgcolor="#FFFFFF">
&nbsp;</TD>
</TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Trade accounts receivable, less allowance of </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
</TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$25,000 and $25,000 for doubtful accounts</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">926,747
  &nbsp;</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">184,162
  &nbsp;</FONT></DIV></TD>
</TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Inventories, net</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">651,095
  &nbsp;</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">408,944
  &nbsp;</FONT></DIV></TD>
</TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Prepaid expenses and other</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">156,419
  &nbsp;</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">33,849
  &nbsp;</FONT></DIV></TD>
</TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Total current assets</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">5,913,229
  &nbsp;</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">10,477,313
  &nbsp;</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
</TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Equipment</STRONG></FONT><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">, net</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">453,355
  &nbsp;</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">200,262
  &nbsp;</FONT></DIV></TD>
</TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Patents</STRONG></FONT><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">, net</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,278,707
  &nbsp;</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: thin solid #000000; ; border-right-style:none; border-right-width:medium" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,066,796
  &nbsp;</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" vAlign=bottom align=left width="2%">&nbsp;</TD>
</TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Total assets</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">7,645,291&nbsp;</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">11,744,371&nbsp;</FONT></DIV></TD>
</TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
</TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>LIABILITIES AND STOCKHOLDERS' EQUITY</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
</TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Current Liabilities:</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
</TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Accounts payable</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,300,075
  &nbsp;</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">604,343
  &nbsp;</FONT></DIV></TD>
</TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Accrued liabilities:</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
</TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Payroll and related</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">302,706
  &nbsp;</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">463,788
  &nbsp;</FONT></DIV></TD>
</TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Deferred revenue</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">322,344
  &nbsp;</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">276,708
  &nbsp;</FONT></DIV></TD>
</TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Warranty reserve</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">331,917
  &nbsp;</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">319,500
  &nbsp;</FONT></DIV></TD>
</TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Legal Settlements</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">150,000
  &nbsp;</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">292,500
  &nbsp;</FONT></DIV></TD>
</TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Other</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">22,236
  &nbsp;</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">26,349
  &nbsp;</FONT></DIV></TD>
</TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Capital lease short-term portion</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">10,967
  &nbsp;</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">9,915
  &nbsp;</FONT></DIV></TD>
</TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: medium none #000000; " vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Total current liabilities</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none #000000; " width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none #000000; " vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none #000000; " vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2,440,245
  &nbsp;</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none #000000; " vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none #000000; " vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none #000000; " vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,993,103
  &nbsp;</FONT></DIV></TD>
</TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: medium none #ffffff; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Long-Term Liabilities:</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none #ffffff; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none #ffffff; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none #ffffff; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none #ffffff; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none #ffffff; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none #ffffff; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" vAlign=bottom align=right width="11%">&nbsp;</TD>
</TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: thin solid #000000; ; border-top-style:none; border-top-width:medium" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Capital lease long-term portion</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: thin solid #000000; ; border-top-style:none; border-top-width:medium" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: thin solid #000000; ; border-top-style:none; border-top-width:medium" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: thin solid #000000; ; border-top-style:none; border-top-width:medium" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">12,131
  &nbsp;</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: thin solid #000000; ; border-top-style:none; border-top-width:medium" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: thin solid #000000; ; border-top-style:none; border-top-width:medium" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: thin solid #000000; ; border-top-style:none; border-top-width:medium" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">23,097
  &nbsp;</FONT></DIV></TD>
</TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Total liabilities</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2,452,376
  &nbsp;</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2,016,200&nbsp; </FONT></DIV></TD>
</TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Commitments and contingencies</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
</TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
</TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Stockholders' equity</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
</TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Preferred stock, $0.00001 par value; 5,000,000 shares authorized:</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
</TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Series D Preferred stock 250,000 shares designated: 50,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
</TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">issued and outstanding each year, respectively. Liquidation</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
</TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">preference of $572,500 and $542,000, respectively.</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">-
  &nbsp;</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">-
  &nbsp;</FONT></DIV></TD>
</TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Series E Preferred stock 350,000 shares designated: 233,250 and 263,250</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
</TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">issued and outstanding, respectively. Liquidation preference</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
</TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">of $2,556,000 and $2,725,000, respectively.</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">3
  &nbsp;</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">3
  &nbsp;</FONT></DIV></TD>
</TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Common stock, $0.00001 par value; 50,000,000 shares authorized;</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
</TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">19,808,819 and 19,342,657 shares issued and outstanding respectively.</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">198
  &nbsp;</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">193
  &nbsp;</FONT></DIV></TD>
</TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Additional paid-in capital</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">47,520,207
  &nbsp;</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">46,095,032
  &nbsp;</FONT></DIV></TD>
</TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Accumulated deficit</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(42,327,493)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">
<DIV>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(36,367,057)</FONT></DIV></TD>
</TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Total stockholders' equity</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">5,192,915&nbsp; </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">9,728,171
  &nbsp;</FONT></DIV></TD>
</TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Total liabilities and stockholders' equity</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">7,645,291
  &nbsp;</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">11,744,371&nbsp; </FONT></DIV></TD>
</TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
</TR></TABLE>
<DIV valign="top"></DIV></DIV>
</font>
<Font style='font-size:10.0pt; color:windowtext' face="Times New Roman" size="2">

<DIV>&nbsp;</DIV>
</font>
<DIV>
<TABLE id=PGBRK cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD vAlign=bottom width="100%" colSpan=3>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>
  <p align="center">
<Font style='font-size:10.0pt; color:windowtext' face="Times New Roman" size="2">
See accompanying
summary of accounting policies and notes to financial statements.<br>
&nbsp;</DIV></TD></TR>
<TR>
<TD align=left width="33%"><FONT size=1>&nbsp;</FONT></TD>
<TD align=middle width="34%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">F-3</FONT></TD>
<TD align=right width="33%"><FONT size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD style="PAGE-BREAK-AFTER: always" width="100%" colSpan=3><FONT size=1>
<HR style="PAGE-BREAK-AFTER: always" color=black noShade SIZE=1>
</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=HDR cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD vAlign=bottom width="100%">&nbsp;
</TD></TR></TABLE></DIV>
<DIV><BR>&nbsp;</DIV>
<DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%">
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="99%" colSpan=11>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation </STRONG></FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="11%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="99%" colSpan=11>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">STATEMENTS OF OPERATIONS</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="11%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Years Ended September 30,</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="12%" colSpan=2>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2004</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="12%" colSpan=2>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2003</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="11%" colSpan=2>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2002</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Revenues:</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Product sales</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">5,581,936 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,070,645 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">649,020 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Related party product sales</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">44,077 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Contract and license </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">170,613 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">244,781 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">317,655 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Total revenues</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">5,752,549 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,315,426 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,010,752 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Cost of revenues</FONT></DIV></TD>
<Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'>

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; font-weight:normal'>
<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>

</font>
</font>



</font>
<Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'>

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; font-weight:normal'>
<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>

</font>
</font>



</font>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">3,469,821 </FONT></DIV></TD>
<Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'>

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; font-weight:normal'>
<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>

</font>
</font>



</font>
<Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'>

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; font-weight:normal'>
<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>

</font>
</font>



</font>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,544,077 </FONT></DIV></TD>
<Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'>

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; font-weight:normal'>
<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>

</font>
</font>



</font>
<Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'>

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; font-weight:normal'>
<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>

</font>
</font>



</font>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">683,844 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Gross profit (loss)</STRONG></FONT></DIV></TD>
<Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'>

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; font-weight:normal'>
<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>

</font>
</font>



</font>
<Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'>

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; font-weight:normal'>
<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>

</font>
</font>



</font>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2,282,728 </FONT></DIV></TD>
<Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'>

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; font-weight:normal'>
<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>

</font>
</font>



</font>
<Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'>

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; font-weight:normal'>
<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>

</font>
</font>



</font>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(228,651</FONT></DIV></TD>

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; font-weight:normal; layout-grid-mode:line'>
<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%" align="left" valign="bottom">



  <Font style='font-size:10.0pt; color:windowtext' face="Times New Roman">
<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; font-weight:normal; layout-grid-mode:line'>
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV>
</font>



</font></TD>

</font>
</font>



<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; font-weight:normal; layout-grid-mode:line'>
<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>

</font>
</font>



<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">326,908 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Operating expenses:</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Selling, general and administrative</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">5,309,547 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">4,863,711 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">3,046,537 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Research and development</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2,988,784 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2,493,351 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">3,622,063 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Loss on sales of asset</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(24,513</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(11,500</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Loss on impairment of equipment</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">32,192 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Total operating expenses</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">8,298,331 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">7,332,549 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">6,689,292 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Loss from operations</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(6,015,603</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(7,561,200</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(6,362,384</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Other income (expense):</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Interest income</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">58,056 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">23,293 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">15,596 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Interest expense</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(2,889</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(686,639</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(1,872,544</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Other</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(2,467</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(800</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Total other income (expense)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">55,167 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(665,813</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(1,857,748</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Net loss</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(5,960,436</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(8,227,013</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(8,220,132</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Dividend requirements on convertible preferred stock</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,365,349 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2,409,228 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">282,912 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Net loss available to common stockholders </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(7,325,785</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(10,636,241</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(8,503,044</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Net loss per share of common stock - basic and diluted</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(0.37</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(0.67</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(0.60</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Average weighted number of common shares outstanding</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">19,603,265 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">15,857,569 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">14,193,508 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR></TABLE>
<DIV valign="top"></DIV></DIV>
<DIV>&nbsp;</DIV>
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  <p align="center"><BR>



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<Font style='font-size:10.0pt; color:windowtext' face="Times New Roman" size="2">
  See accompanying
  summary of accounting policies and notes to financial statements.</font></font></font></p>



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<TABLE id=PGBRK cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD align=left width="33%"><FONT size=1>&nbsp;</FONT></TD>
<TD align=middle width="34%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">F-4</FONT></TD>
<TD align=right width="33%"><FONT size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD width="100%" colSpan=3><FONT size=1>
<HR style="PAGE-BREAK-AFTER: always" color=black noShade SIZE=1>
</FONT></TD></TR></TABLE>
<TABLE id=HDR cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
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<TD vAlign=bottom width="100%">&nbsp;
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<DIV>
<BODY><DIV><TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%">
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="83%" colSpan=25>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="83%" colSpan=25>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Statements of Stockholders' Equity (Deficit) </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="27%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="6%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="6%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="6%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="6%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="6%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="6%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="6%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="6%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="84%" colSpan=26>
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Years Ended September 30, 2004, 2003 and 2002 </FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="27%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="55%" colSpan=23>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Convertible Preferred Stock </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="27%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="13%" colSpan=5>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Series B </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="13%" colSpan=5>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Series C </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="13%" colSpan=5>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Series D </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="13%" colSpan=5>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Series E</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="27%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="6%" colSpan=2>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Shares </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="6%" colSpan=2>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Amount </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="6%" colSpan=2>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Shares </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="6%" colSpan=2>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Amount </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="6%" colSpan=2>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Shares </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="6%" colSpan=2>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Amount </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="6%" colSpan=2>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Shares </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="6%" colSpan=2>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Amount </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Balance, September 30, 2001 </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">168,860 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">10,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">

  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' size="2" face="Times New Roman">

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<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV>
</font>
</font>
</font>



</font></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Issuance of common stock: </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Upon exercise of stock options </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">For compensation and services </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Value assigned to 130,000 options granted for services </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">
  Value assigned to 100,000 warrants granted for services </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Value assigned to 30,000 options, granted to consultant </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Debt discount on 12% Convertible Notes </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Conversion of Series B preferred stock </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(168,860</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(2</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Issuance of Series D preferred stock, net of offering costs of $78,752 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">235,400 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Deemed dividends and accretion on convertible preferred stock of $282,912 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Net loss for the year </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Balance, September 30, 2002 </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">10,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">235,400 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Issuance of Series E preferred stock, net of offering costs of $176,225 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">343,250 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">3 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Issuance of common stock: </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Upon exercise of stock options </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">For compensation and services </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">For cash at $5.50 per share, net of offering costs of $545,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Conversion of Series C preferred stock </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(10,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Conversion of Series D preferred stock </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(185,400</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(2</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Conversion of Series E preferred stock </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(80,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Exercise of warrants </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Legal settlement at $5.85 per share </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Conversion of 12% convertible subordinated notes </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Issuance of stock options and warrants for services </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Deemed dividends and accretion on convertible preferred stock of $2,409,228 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Net loss for the year </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Balance, September 30, 2003 </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">50,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">263,250 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">3 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Issuance of common stock: </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Upon exercise of stock options </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Legal settlement and royalty buyout at $4.96 per share</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Conversion of Series E preferred stock </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(30,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Exercise of warrants </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Value assigned to 28,438 options issued on termination </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Deemed dividends and accretion on convertible preferred stock of $1,365,349 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Net loss for the year </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="27%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Balance, September 30, 2004 </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">50,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">233,250 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="5%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">3 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="27%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="5%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR></TABLE>
<DIV valign="top">&nbsp;</DIV>
<DIV>
  <p align="center"><BR>
<Font style='font-size:10.0pt;font-family:Symbol;layout-grid-mode:line; color:windowtext' face="Times New Roman">

  <Font style='font-size:10.0pt;font-family:"Times New Roman";font-weight:normal'>

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>
<Font style='font-size:10.0pt; color:windowtext' face="Times New Roman" size="2">
  See accompanying
  summary of accounting policies and notes to financial statements.</font></font></font></font></p>
<TABLE id=PGBRK cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR vAlign=top>
<TD width="100%" colSpan=3>&nbsp;</TD></TR>
<TR>
<TD align=left width="33%"><FONT size=1>&nbsp;</FONT></TD>
<TD align=middle width="34%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-5a&nbsp;</FONT></TD>
<TD align=right width="33%"><FONT size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD width="100%" colSpan=3><FONT size=1>
<HR style="PAGE-BREAK-AFTER: always" color=black noShade SIZE=1>
</FONT></TD></TR></TABLE>
<TABLE id=HDR cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD vAlign=bottom width="100%">&nbsp;</TD></TR></TABLE>&nbsp;<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%">
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="99%" colSpan=18>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="99%" colSpan=18>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Statements of Stockholders' Equity (Deficit) </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="32%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="10%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="10%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="10%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="10%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="10%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="10%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="32%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="10%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="10%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="10%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="10%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="10%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="10%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="100%" colSpan=19>
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Years Ended September 30, 2004, 2003 and 2002 </FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="32%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="10%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="10%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="10%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="10%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="10%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="10%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="32%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="65%" colSpan=16>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Common Stock </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="32%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="10%" colSpan=2>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Shares </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="10%" colSpan=2>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Amount </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="10%" colSpan=2>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Additional Paid-in Capital </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="10%" colSpan=2>
<DIV align=center><font size="2">Accumulated<br>
  Deficit</font><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"> </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="10%" colSpan=2>
<DIV align=center>
<Font style='font-size:10.0pt;font-family:Symbol;layout-grid-mode:line; color:windowtext' face="Times New Roman">

<Font style='font-size:10.0pt; color:windowtext; font-family:Times New Roman; font-weight:normal' face="Times New Roman" size="2">

  <FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Total Stockholders' Equity (Deficit) </FONT>
</font>
</font>



</DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Balance, September 30, 2001 </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">13,704,139 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">137 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">22,913,268 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(19,919,912</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2,993,495 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Issuance of common stock: </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Upon exercise of stock options </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">6,250 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">18,750 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">18,750 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">For compensation and services </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">74,129 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">304,920 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">304,921 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Value assigned to 130,000 options granted for services </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">256,135 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">256,135 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Value assigned to 100,000 warrants granted for services </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">218,803 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">218,803 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Value assigned to 30,000 options, granted to consultant </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">42,898 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">42,898 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Debt discount on 12% Convertible Notes </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,225,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,225,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Conversion of Series B preferred stock </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">566,958 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">6 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(4</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Issuance of Series D preferred stock, net of offering costs of $78,752 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2,275,246 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2,275,248 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Deemed dividends and accretion on convertible preferred stock of $282,912 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Net loss for the year </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(8,220,132</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(8,220,132</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Balance, September 30, 2002 </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">14,351,476 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">144 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">27,255,016 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(28,140,044</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(884,882</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Issuance of Series E preferred stock, net of offering costs of $176,225 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">3,256,272 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">3,256,275 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Issuance of common stock: </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Upon exercise of stock options </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">408,951 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">4 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,614,223 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,614,227 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">For compensation and services </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">109,844 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">410,815 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">410,816 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">For cash at $5.50 per share, net of offering costs of $545,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,818,180 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">18 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">9,454,982 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">9,455,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Conversion of Series C preferred stock </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">41,130 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Conversion of Series D preferred stock </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">695,266 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">7 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(5</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Conversion of Series E preferred stock </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">253,294 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">3 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(3</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Exercise of warrants </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">347,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">3 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">903,718 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">903,721 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Legal settlement at $5.85 per share </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">100,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">584,999 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">585,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Conversion of 12% convertible subordinated notes </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,217,516 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">12 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2,435,020 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2,435,032 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Issuance of stock options and warrants for services </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">179,995 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">179,995 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Deemed dividends and accretion on convertible preferred stock of $2,409,228 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Net loss for the year </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(8,227,013</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(8,227,013</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Balance, September 30, 2003 </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">19,342,657 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">193 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">46,095,032 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(36,367,057</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">9,728,171 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Issuance of common stock: </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Upon exercise of stock options </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">292,573 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">3 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,061,314 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,061,317 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Legal settlement and royalty buyout at $4.96 per share</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">50,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">247,999 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">248,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Conversion of Series E preferred stock </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">98,589 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(1</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Exercise of warrants </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">25,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">50,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">50,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Value assigned to 28,438 options issued on termination </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">65,863 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">65,863 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Deemed dividends and accretion on convertible preferred stock of $1,365,349 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Net loss for the year </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(5,960,436</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(5,960,436</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="32%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Balance, September 30, 2004 </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">19,808,819 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">198 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">47,520,207 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(42,327,493</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">5,192,915 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="32%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR></TABLE>
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<p align="center">
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See accompanying
summary of accounting policies and notes to financial statements.<br>
&nbsp;</font></font></font></font></DIV>
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<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

<DIV>
<TABLE id=PGBRK cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR vAlign=top>
<TD width="100%" colSpan=3>&nbsp;</TD></TR>
<TR>
<TD align=left width="33%"><FONT size=1>&nbsp;</FONT></TD>
<TD align=middle width="34%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">F-5</FONT></TD>
<TD align=right width="33%"><FONT size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD width="100%" colSpan=3><FONT size=1>
<HR style="PAGE-BREAK-AFTER: always" color=black noShade SIZE=1>
</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=HDR cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
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<TD vAlign=bottom width="100%">&nbsp;
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<DIV><BR>
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<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="99%" colSpan=11>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation </STRONG></FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="99%" colSpan=11>&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="98%" colSpan=10>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">STATEMENTS OF CASH FLOWS</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="11%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Years Ended September 30,</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="12%" colSpan=2>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2004</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="12%" colSpan=2>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2003</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="11%" colSpan=2>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2002</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Increase (Decrease) in Cash</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Operating Activities:</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Net loss </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(5,960,436</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(8,227,013</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(8,220,132</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Adjustments to reconcile net loss to net cash</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">used in operations:</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Depreciation and amortization</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">239,948 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">549,612 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">737,248 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Allowance for doubtful accounts</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">4,809 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Warranty provision</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">101,671 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">313,187 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Inventory obsolescense</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">90,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Gain on sale of asset</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(11,500</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Common stock issued for services and compensation</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">410,816 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">304,920 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Options and warrants granted for services</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">179,995 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">517,836 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Options granted for compensation</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">65,863 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,486,701 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Common stock issued for legal settlement</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">585,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Write-off of abandoned patents</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">37,798 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">58,138 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Write down for asset held for sale</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">32,192 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Amortization of debt discount</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">405,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,620,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Changes in assets and liabilities:</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Trade accounts receivable</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(742,585</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(77,485</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">6,098 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Inventories</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(332,151</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(272,063</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">60,132 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Prepaid expenses and other</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(122,570</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(13,719</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">47,030 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Accounts payable</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">695,732 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(12,188</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">411,756 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Warranty reserve</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(89,254</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">-</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">-</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Accrued liabilities</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(14,059</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">696,680 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">256,996 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Net cash used in operating activities</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(6,030,043</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(5,457,369</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(2,692,585</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Investing Activities:</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Purchase of equipment</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(395,932</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(108,246</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(84,080</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Patent costs paid</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(346,818</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(112,007</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(305,418</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Proceeds from sales of equipment</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">11,500 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Net cash used in investing activities</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(742,750</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(220,253</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(377,998</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Financing Activities:</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Proceeds from issuance of preferred stock</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2,432,500 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2,354,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Proceeds from issuance of common stock</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">10,000,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Offering costs paid </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(721,225</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(78,752</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Payments on capital lease</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(9,914</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(8,963</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(8,066</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Proceeds from issuance of convertible promissory notes</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,225,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Proceeds from exercise of common stock warrants</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">50,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">221,876 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Proceeds from issuance of senior secured promissory notes</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">500,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,500,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Payments on senior secured promissory notes</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(318,155</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Proceeds from exercise of stock options</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,061,317 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,614,227 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">18,750 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Net cash provided by financing activities</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,101,403 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">13,720,260 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">5,010,932 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Net increase (decrease) in cash</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(5,671,390</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">8,042,638 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,940,349 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Cash, beginning of year</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">9,850,358 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,807,720 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,354,072 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Cash, end of year</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">4,178,968 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">9,850,358 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">3,294,421 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD></TR></TABLE>
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  <p align="center">
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  See accompanying
  summary of accounting policies and notes to financial statements.</font></font></font></font></p>
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<TR vAlign=top>
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<TD align=left width="33%"><FONT size=1>&nbsp;</FONT></TD>
<TD align=middle width="34%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">F-6</FONT></TD>
<TD align=right width="33%"><FONT size=1>&nbsp;</FONT></TD></TR>
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<TD width="100%" colSpan=3><FONT size=1>
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</FONT></TD></TR></TABLE>
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<TR>
<TD vAlign=bottom width="100%">&nbsp;
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>Summary of Accounting Policies </STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>
<HR align=center width="100%" color=#000000 noShade SIZE=2>
</DIV></TD></TR></TABLE><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>ORGANIZATION AND BUSINESS </STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 other sound technologies.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The Company&#146;s principal markets for its proprietary sound reproduction technologies and products are in North America, Europe and Asia.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>LIQUIDITY AND MANAGEMENT&#146;S PLAN</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
  The Company incurred net
losses of $5,960,436, $8,227,013, and $8,220,013 and negative cash flow from
operations of $6,030,043, $5,457,369, and $4,179,286 in the years ended
September 30, 2004, 2003 and 2002, respectively.&nbsp; The Company had working
capital of $3,472,984 and cash on hand of $4,178,968 at September 30, 2004.&nbsp; In
December 2004, the Company received a firm order for $4,500,000 in LRAD products
and $400,000 in ancillary products which the Company is providing on a
value-added reseller basis.&nbsp; The order calls for deliveries in December 2004 and
January 2005 and customary payment terms (see Note 14 below).&nbsp; Also in December
2004, the Company sold for cash in a private offering an aggregate of $2,000,000
of unsecured subordinated promissory notes due December 31, 2006.&nbsp; In connection
with the financing, the Company also issued five-year warrants to purchase an
aggregate of 150,000 shares, 75,000 of which have an exercise price of $9.28 per
share, and 75,000 of which have an exercise price of $8.60 per share.&nbsp; An
officer, director and significant stockholder purchased a note in the principal
amount of $500,000 and received a warrant exercisable for 37,500 shares with an
exercise price of $9.28 per share.<p class="Normal">The Company historically 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.&nbsp; Management expects to incur
additional operating losses in fiscal 2005 as a result of expenditures for
research and development and marketing costs for sound products.&nbsp; 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.&nbsp; Based on the Company&#146;s cash position, and assuming
currently planned expenditures and level of operations, management believes the
Company will have sufficient capital resources for the next twelve months.&nbsp;
Management believes increased product sales will provide additional operating
funds.&nbsp; If required, management has significant flexibility to adjust the level
of research and development and selling and administrative expenses based on the
availability of resources.&nbsp; The Company also may have available funds from a
Committed Equity Financing Facility (see Note 14 below).  </FONT><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #ff0000; FONT-FAMILY: Times New Roman">&nbsp;</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>
  &nbsp;<br>
&nbsp;</DIV>
<DIV>
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<TR vAlign=top>
<TD width="100%" colSpan=3>&nbsp;<FONT id=TAB2 style="COLOR: black; LETTER-SPACING: 207pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;</TD></TR>
<TR>
<TD align=left width="33%"><FONT size=1>&nbsp;</FONT></TD>
<TD align=middle width="34%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">F-7</FONT></TD>
<TD align=right width="33%"><FONT size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD width="100%" colSpan=3><FONT size=1>
<HR style="PAGE-BREAK-AFTER: always" color=black noShade SIZE=1>
</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=HDR cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD vAlign=bottom width="100%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>Summary of Accounting Policies </STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>
<HR align=center width="100%" color=#000000 noShade SIZE=3>
&nbsp;</DIV>
</TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>USE OF ESTIMATES</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 affect the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The Company&#146;s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and trade accounts receivable.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>FAIR VALUE OF FINANCIAL INSTRUMENTS</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>ALLOWANCE FOR DOUBTFUL ACCOUNTS </STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of the Company&#146;s customers to make required payments. The Company considers the following factors when determining if collection of a fee is reasonably assured: customer credit-worthiness, past transaction history with the customer, current economic industry trends and changes in customer payment terms. If the Company has no previous experience with the customer, the Company may obtain reports from various credit organizations to ensure that the customer has a history of paying its creditors. The Company may also request financial information, including financial statements or other documents (e.g., bank statements) to ensure that the customer has the means of making payment. If these factors do not indicate colle
ction is reasonably assured, revenue is deferred until collection becomes reasonably assured, which is generally upon receipt of cash. If the financial condition of the Company&#146;s customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required.</FONT></DIV>
<DIV>
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<TD width="100%" colSpan=3>&nbsp;<FONT id=TAB2 style="COLOR: black; LETTER-SPACING: 207pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;</TD></TR>
<TR>
<TD align=left width="33%"><FONT size=1>&nbsp;</FONT></TD>
<TD align=middle width="34%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">F-8</FONT></TD>
<TD align=right width="33%"><FONT size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD width="100%" colSpan=3><FONT size=1>
<HR style="PAGE-BREAK-AFTER: always" color=black noShade SIZE=1>
</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=HDR cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD vAlign=bottom width="100%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>Summary of Accounting Policies </STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>
<HR align=center width="100%" color=#000000 noShade SIZE=2>
<BR></DIV>
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</font>

<Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:700'>

<DIV>CONTRACT MANUFACTURER</font><Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal'><br>
  T<FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; font-weight:normal; layout-grid-mode:line; color:windowtext" face="Times New Roman" size="2">he
  Company is reliant on one contract manufacturer for production of HSS and LRAD
  products on a turnkey basis. The Company is currently in the process of
  negotiating a formal agreement with this contract manufacturer. This
  manufacturing relationship has no specified term and the Company could be
  materially impacted if it ceased doing business with this contract
  manufacturer and was unable to establish other production in a timely manner.
  At September 30, 2004 the Company had $530,970 of accounts payable to this
  contract manufacturer.<br>
&nbsp;</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
  During fiscal 2004 the Company shipped materials to this contract
  manufacturer, booked an amount due from contract manufacturer and relieved
  inventory of $523,080. The Company did not recognize any revenue on these
  transactions. At September 30, 2004 the remaining balance due from the contract manufacturer, for shipments made to them, was $393,636. The contract manufacturer used these materials to build products for the Company. </FONT>
<Font style='font-size:10.0pt;font-family:Symbol;layout-grid-mode:line; color:windowtext' face="Times New Roman">

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; font-weight:normal' face="Times New Roman" size="2">

  <FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
  The above due from contract manufacturer of $393,636 has been netted against
  the payable to the contract manufacturer of $530,970, and the net is included
  in accounts payable.</FONT></font></font></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>INVENTORIES</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
  Inventories are valued at the lower of cost or net realizable value. Cost is
  determined on a first-in, first-out basis. The Company has inventory reserves
  for estimated obsolescence or unmarketable inventory which is equal to the
  difference between the cost of inventory and the estimated market value based
  upon assumptions about future demand and market conditions. </FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>EQUIPMENT AND DEPRECIATION</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Equipment is stated at cost. Depreciation is computed over the estimated useful lives of three to five years using the straight-line method. Upon retirement or disposition of equipment, the related cost and accumulated depreciation or amortization are removed and the gain or loss is recorded. </FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>INTANGIBLES</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Effective as of the beginning of fiscal 2003, the company fully adopted Statement of Financial Accounting Standards No. 141 (FAS 141), &#147;Business Combinations,&#148; and Statement of Financial Accounting Standards No. 142 (FAS 142), &#147;Goodwill and Other Intangible Assets.&#148; The provisions of FAS 141 (1) require that the purchase method of accounting be used for all business combinations initiated after June 30, 2001, (2) provide specific criteria for the initial recognition and measurement of intangible assets apart from goodwill, and (3) require that unamortized negative goodwill be written off immediately as an extraordinary gain instead of being deferred and amortized. FAS 141 also requires that, upon adoption of FAS 142, the Company reclassify the carrying amounts of certain intangible assets into or out o
f goodwill, based on certain criteria. The adoption of FAS 142 did not have a material effect on the Company&#146;s financial position or results of operations.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">FAS 142 primarily addresses the accounting for goodwill and intangible assets subsequent to their initial recognition. The provisions of FAS 142; (1) prohibit the amortization of goodwill and indefinite-lived intangible assets, (2) require that goodwill and indefinite-lived intangible assets be reviewed periodically to determine if they may be impaired, (3) require that reporting units be identified for the purpose of assessing potential impairments of goodwill, and (4) remove the forty-year limitation on the amortization period of intangible assets that have finite lives.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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
  which has been estimated to be 15 years. 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. The Company wrote off $37,798, $-0- and $58,138 of previously capitalized patent costs during the years ended September 30, 2004, 2003 and 2002, respectively.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>LEASES</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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, 2004, the Company had recorded $10,967 in short-term and $12,131 in long-term capital lease obligations.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>GUARANTEES AND INDEMNIFICATIONS </STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">In November 2002, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation ("FIN") No. 45 "Guarantor'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." The following is a summary of the Company's agreements that the Company has determined are within the scope of FIN No. 45:</FONT></DIV>
<DIV>
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<TD align=middle width="34%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">F-9</FONT></TD>
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<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>Summary of Accounting Policies </STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>
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<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">The Company provides a one year warranty for most of its products. See &#147;Warranty Reserves.&#148;</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">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 serving in such capacity. The term of the indemnification period is for the officer or director'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 officers&#146; 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, 2004.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">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's activities or, in some cases, as a result of the indemnified party'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, 2004. </FONT><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>REVENUE RECOGNITION</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The Company derives its revenue primarily from two sources: (i) component and product sale revenues and associated engineering and installation (&#147;Product Sales&#148;) and (ii) contract and license fee revenue. Component and Product Sales revenues are recognized in the periods that products are shipped to customers, FOB shipping point or destination, when a signed contract exists, the fee is fixed and determinable, collection of resulting receivables is probable and there are no remaining obligations on the part of the Company. Revenues from engineering contracts are recognized based on milestones or completion of the contracted services. Revenues from ongoing 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 generally recognized ratably over the specified term of the particular license or agreement. </FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>SHIPPING AND HANDLING COSTS</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 $211,502, $62,810 and $67,850 for the fiscal years ended September 30, 2004, 2003 and 2002, respectively.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>ADVERTISING</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Advertising costs are charged to expenses as incurred. The Company expensed $69,893, $8,695 and $-0- for the years ended September 2004, 2003 and 2002, respectively.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>RESEARCH AND DEVELOPMENT COSTS</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Research and development costs are expensed as incurred.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>WARRANTY RESERVES</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The Company warrants its products to be free from defects in materials and workmanship for a period of 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></DIV>
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<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>Summary of Accounting Policies </STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>
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</TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 8 for additional information regarding warranties.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>INTEREST EXPENSE</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Interest expense includes interest expense, redemption premiums and non-cash amortization of debt discount. </FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>INCOME TAXES</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>COMPREHENSIVE INCOME</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>IMPAIRMENT OF LONG-LIVED ASSETS</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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. The Company wrote off $37,798, $-0- and $58,138 of patent costs during the years ended September 30, 2004, 2003 and 2002, respectively.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>SEGMENT INFORMATION</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 and NeoPlanar sound products to companies that employ audio in consumer, commercial and professional applications. The Government and Force Protection Systems Group (Government Group) markets LRAD, NeoPlanar, SoundCluster and HSS sound products to government and military customers and to the growing force protection and commercial security markets. See Note 13.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>NET LOSS PER SHARE</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 accreted dividends, by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflect 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 5,197,557 shares of common stock were outstanding at September 30, 2004. Stock options, warrants and convertible preferred stock and notes exercisable into </FONT><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Tim
es New Roman">4,999,522 shares of common stock were outstanding at September 30, 2003 and stock options, warrants and convertible preferred stock exercisable into 5,462,166 shares of common stock were outstanding at September 30, 2002. 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></DIV>
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<TD align=middle width="34%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">F-11</FONT></TD>
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<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>Summary of Accounting Policies </STRONG></FONT></DIV>
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</TD></TR></TABLE></DIV>
<DIV>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Net loss available to common stockholders was increased during fiscal 2004, 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 5). The net loss available to common stockholders was also increased in fiscal 2004, 2003 and 2002 by an additional deemed dividend computed from a discount provision in convertible preferred stock (see Note 5). Such imputed deemed dividends are not included in the Company&#146;s stockholders&#146; equity as the Company has an accumulated deficit
  and therefore is reflected as an increase and a related decrease to additional
  paid in capital. 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.<br>
&nbsp;</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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).
  Such accretions are not included in the company's stockholders' equity as the
  company has an accumulated deficit and therefore is reflected as an increase
  and a related decrease to additional paid in capital. These amounts increase the net loss available to common stockholders. Net loss available to common stockholders is computed as follows:</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%">
<TR>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Years Ended September 30,</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=middle width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>2,004 </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=middle width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>2,003 </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=middle width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>2,002 </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="57%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Net loss</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(5,960,436</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(8,227,013</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(8,220,132</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Imputed deemed dividends on Series D and E</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">warrants issued with preferred stock [note 5]</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(448,572</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(538,070</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(91,492</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Imputed deemed dividends on Series D and E</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">preferred stock [note 5]</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(736,449</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1,683,500</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(104,444</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Accretion on preferred stock at 6% stated rate [note 5]:</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Series B preferred stock</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
&nbsp;</TD>
</font>
<Font style='font-size:10.0pt; color:windowtext' face="Times New Roman" size="2">

<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
- -</TD>
</font>
<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
&nbsp;</TD>
</font>
<Font style='font-size:10.0pt; color:windowtext' face="Times New Roman" size="2">

<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
- -</TD>
</font>
<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(16,932</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Series C preferred stock</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
&nbsp;</TD>
</font>
<Font style='font-size:10.0pt; color:windowtext' face="Times New Roman" size="2">

<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
- -</TD>
</font>
<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(6,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(12,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Series D preferred stock</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(30,171</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(65,844</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(58,044</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Series E preferred stock</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(150,157</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(115,814</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">
&nbsp;</TD>
</font>
<Font style='font-size:10.0pt; color:windowtext' face="Times New Roman" size="2">

<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
- -</TD>
</font>
<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="57%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Net loss available to common stockholders</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(7,325,785</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(10,636,241</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(8,503,044</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>STOCK-BASED COMPENSATION</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In December 2002, the FASB issued FAS No. 148, &#147;Accounting for Stock-Based Compensation &#151; Transition and Disclosure&#148;, which amended FAS No. 123, &#147;Accounting for Stock-Based Compensation.&#148; The new standard provides alternative methods of transition for a voluntary change to the fair market value based method for accounting for stock-based employee compensation. Additionally, the statement amends the disclosure requirements of FAS 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. This statement is effective for the Company&#146;s financial statements for the fiscal year ended September 30, 2003 and the Company adopted the disclosure requir
ements effective October 1, 2002.&nbsp; In compliance with FAS No. 148, the Company has elected to continue to follow the intrinsic value method in accounting for its stock-based employee compensation plan as defined by APB No. 25. </FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 2004, 2003 and 2002, respectively: dividend yield of zero percent for all years; expected volatility of 57 to 75 percent in 2004, 68 to 84&nbsp;percent in 2003 and 63&nbsp;percent in 2002; risk-free interest rates of 1.83 to 6.72&nbsp;percent; and expected lives of 2.21 to 5&nbsp;years.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting periods. The Company's pro forma information follows:</FONT></DIV>
<DIV><BR></DIV>
<DIV>
<TABLE id=PGBRK cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR vAlign=top>
<TD width="100%" colSpan=3>&nbsp;<FONT id=TAB2 style="COLOR: black; LETTER-SPACING: 207pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;</TD></TR>
<TR>
<TD align=left width="33%"><FONT size=1>&nbsp;</FONT></TD>
<TD align=middle width="34%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">F-12</FONT></TD>
<TD align=right width="33%"><FONT size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD width="100%" colSpan=3><FONT size=1>
<HR style="PAGE-BREAK-AFTER: always" color=black noShade SIZE=1>
</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=HDR cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD vAlign=bottom width="100%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>Summary of Accounting Policies </STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>
<HR align=center width="100%" color=#000000 noShade SIZE=2>
<BR></DIV>
</TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%">
<TR>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Years Ended September 30,</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=middle width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>2004</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=middle width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>2003</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=middle width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>2002</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Net loss available to common stockholders</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(7,325,785</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(10,636,241</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(8,503,044</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Plus: Stock-based employee compensation </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">expense included in reported net loss</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">65,863 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="73%" colSpan=5>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Less: Total stock-based employee compensation expense</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="57%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">determined using fair value based method</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(940,111</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(972,896</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(933,704</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pro forma net loss available to common stockholders</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(8,200,033</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(11,609,137</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(9,436,748</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Net loss per common share - basic</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="57%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">and diluted - pro forma</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(0.42</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(0.73</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(0.66</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Net loss per common share - basic</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="57%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">and diluted - as reported</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(0.37</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(0.67</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(0.60</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>COMMON STOCK ISSUED FOR SERVICES</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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
  closing stock price on the day prior to the date of issuance.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>STATEMENT OF CASH FLOWS</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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, when purchased, to be cash equivalents.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>RECENT ACCOUNTING PRONOUNCEMENTS</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In December 2003, the FASB issued FIN&nbsp;46-R, &#147;Consolidation of Variable Interest Entities&nbsp;&#151; an interpretation of ARB&nbsp;51&nbsp;(revised December 2003)&#148;, which replaces FIN&nbsp;46.&nbsp; FIN&nbsp;46-R incorporates certain modifications to FIN 46 adopted by the FASB subsequent to the issuance of FIN&nbsp;46, including modifications of the scope of FIN&nbsp;46.&nbsp; For all non-special purpose entities (&#147;SPE&#148;) created prior to February&nbsp;1, 2003, public entities will be required to adopt FIN 46-R at the end of the first interim or annual reporting period ending after March&nbsp;15, 2004.&nbsp; For all entities (regardless of whether the entity is an SPE) that were created subsequent to January&nbsp;31, 2003, public entities are already required to apply the provisions of FIN 46, and 
should continue doing so unless they elect to adopt the provisions of Fin 46-R early as of the first interim or annual reporting period ending after December&nbsp;15, 2003.&nbsp; If they do not elect to adopt FIN&nbsp;46-R early, public entities would be required to apply FIN&nbsp;46-R to those post-January&nbsp;31, 2003 entities as of the end of the first interim or annual reporting period ending after March&nbsp;15, 2004. The adoption of FIN 46-R for non-SPEs did not have a material impact on the Company&#146;s financial position, results of operations or cash flows. </FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In March 2004, the Emerging Issues Task Force (&#147;EITF&#148;) reached a consensus on Issue No. 03-1, &#147;The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.&#148; EITF 03-1 provides guidance on other-than-temporary impairment models for marketable debt and equity securities accounted for under SFAS No. 115, &#147;Accounting for Certain Investments in Debt and Equity Securities,&#148; and SFAS No. 124, &#147;Accounting for Certain Investments Held by Not-for-Profit Organizations,&#148; and non-marketable equity securities accounted for under the cost method. The EITF developed a basic three-step model to evaluate whether an investment is other-than-temporarily impaired. On September 30, 2004, the FASB approved the issuance of FASB Staff Position (FSP) EITF 03-1-1, which delays th
e effective date until additional guidance is issued for the application of the recognition and measurement provisions of EITF 03-1 to investments in securities that are impaired. The Company does not expect the adoption of EITF 03-1 to have a material effect on its consolidated financial position, results of operations or cash flows.</FONT></DIV>
<DIV><BR></DIV>
<DIV>
<TABLE id=PGBRK cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR vAlign=top>
<TD width="100%" colSpan=3>&nbsp;<FONT id=TAB2 style="COLOR: black; LETTER-SPACING: 207pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;</TD></TR>
<TR>
<TD align=left width="33%"><FONT size=1>&nbsp;</FONT></TD>
<TD align=middle width="34%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">F-13</FONT></TD>
<TD align=right width="33%"><FONT size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD width="100%" colSpan=3><FONT size=1>
<HR style="PAGE-BREAK-AFTER: always" color=black noShade SIZE=1>
</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=HDR cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD vAlign=bottom width="100%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>Summary of Accounting Policies </STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>
<HR align=center width="100%" color=#000000 noShade SIZE=2>
<BR></DIV>
</TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
  December 2004, the Financial Accounting Standards Board (FASB) issued
  Financial Accounting Standard (FAS) 123(R), &#147;Share Based Payment&#148;, Statement
  123(R) is effective for public companies at the beginning of the first interim
  or annual period after June 15, 2005. This statement eliminates the ability to
  account for share-based compensation using the intrinsic value-based method
  under APB Opinion No. 25, &#147;Accounting for Stock Issued to Employees.&#148;
  Statement 123(R) would require the Company to calculate equity-based
  compensation expense for stock options and employee stock purchase plan rights
  granted to employees based on the fair value of the equity instrument at the
  time of grant. Currently, the Company discloses the pro forma net income
  (loss) and the related pro forma income (loss) per share information in
  accordance with FAS 123 and FAS 148, &#147;Accounting for Stock-Based Compensation
  Costs-Transition and Disclosure.&#148; The Company has not evaluated the impact
  that Statement 123(R) will have on its financial position and results of
  operations.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>RECLASSIFICATIONS</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Where necessary, prior year&#146;s information has been reclassified to conform with the fiscal 2004 statement presentation.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%">
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>1. INVENTORIES</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Inventories consisted of the following at September 30, </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2004 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2003 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Finished goods</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">342,647 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">13,690 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Work in process</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">182,638 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="71%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Raw materials</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">418,448 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">232,616 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">761,095 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">428,944 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="71%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Reserve for obsolescence</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(110,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(20,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">651,095 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">408,944 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 18pt" align=left>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 18pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">At September 30, 2004, $79,036 of raw materials and $355,879 of finished goods were located </FONT>
<Font style='font-size:10.0pt;font-family:Symbol;layout-grid-mode:line; color:windowtext' face="Times New Roman">

  <Font style='font-size:10.0pt;font-family:"Times New Roman";font-weight:normal'>
<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

  <FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">at the Company&#146;s contract manufacturer in San Jose, California.</FONT></font></font></font><br>
&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 18pt" align=left><BR></DIV>
<DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%">
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>2. EQUIPMENT</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Equipment consisted of the following at September 30, </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2004 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2003 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Machinery and equipment</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">604,994 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">571,927 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Office furniture and equipment</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">816,714 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">480,536 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="71%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Leasehold improvements</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">225,178 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">198,491 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,646,886 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,250,954 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="71%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Accumulated depreciation</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1,193,531</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1,050,692</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Net equipment</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">453,355 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">200,262 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 18pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Included in office furniture and equipment for the years ended September 30, 2004 and 2003, respectively are $335,691 and $208,817 for purchased software, which is amortized over three years. The unamortized portion of software for the years ended September 30, 2004 and 2003, respectively, are $177,930 and $97,731, respectively.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR>
  <Font style='font-size:10.0pt; color:windowtext; font-family:Symbol' face="Times New Roman" size="2">
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<DIV>
<TABLE id=PGBRK0 cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD align=left width="33%"><FONT size=1>&nbsp;</FONT></TD>
<TD align=middle width="34%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">F-14</FONT></TD>
<TD align=right width="33%"><FONT size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD style="PAGE-BREAK-AFTER: always" width="100%" colSpan=3><FONT size=1>
<HR style="PAGE-BREAK-AFTER: always" color=black noShade SIZE=1>
</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=HDR0 cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD vAlign=bottom width="100%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation</STRONG></FONT></DIV>
</font>
<Font style='font-size:10.0pt; color:windowtext' face="Times New Roman" size="2">

<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>
  <strong>N</strong></font><strong><Font style='color:windowtext' face="Times New Roman" size="3">otes
  to the Financial Statements</font></strong><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2"><HR align=center width="100%" color=#000000 noShade SIZE=2>
</DIV>
</TD></TR></TABLE></DIV>
<DIV><BR></font>
</font>



  </DIV>
</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Depreciation expense, excluding amortization of software, was $96,164, $130,916 and $211,474 for the years ended September 30, 2004, 2003 and 2002, respectively. Amortization of purchased software was $46,675, $26,488 and $43,216 for the years ended September 30, 2004, 2003 and 2002, respectively.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>3. INTANGIBLES</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><U>Purchased Technology</U></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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></DIV>
<DIV><BR></DIV>
<DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%">
<TR>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Purchased technology consisted of the following at September 30, </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2004 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2003 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Cost</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%" colSpan=2 bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$1,262,500 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" colSpan=2 bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$1,262,500 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Accumulated amortization</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1,262,500</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1,262,500</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="71%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Net purchased technology</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Patents consisted of the following at September 30, </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2004 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2003 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Cost</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,578,578 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,287,058 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Accumulated amortization</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(299,871</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(220,262</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="71%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Net patent</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,278,707 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,066,796 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR></TABLE></DIV>
<FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<p>
<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; font-weight:normal; layout-grid-mode:line' face="Times New Roman" size="2">

<FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
Aggregate amortization expense for the Company&#146;s intangible assets are
summarized as follows:</FONT></font></p>
  <DIV><BR>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%">
<TR>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Years Ended September 30,</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="12%" colSpan=2>
<DIV align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>2004 </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="12%" colSpan=2>
<DIV align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>2003 </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%" colSpan=2>
<DIV align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>2002 </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%" bgcolor="#CBDBD1">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Purchased technology</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">315,636 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">420,828 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Patents</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">97,109 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">79,544 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">61,730 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="57%" bgcolor="#CBDBD1">
<DIV align=left>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">97,109 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">395,180 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">482,558 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR></TABLE>
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  <Font style='font-size:10.0pt; color:windowtext; font-family:Symbol' face="Times New Roman" size="2">
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<DIV>
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<TD align=left width="33%"><FONT size=1>&nbsp;</FONT></TD>
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F-15</FONT></TD>
<TD align=right width="33%"><FONT size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD style="PAGE-BREAK-AFTER: always" width="100%" colSpan=3><FONT size=1>
<HR style="PAGE-BREAK-AFTER: always" color=black noShade SIZE=1>
</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=HDR1 cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD vAlign=bottom width="100%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation</STRONG></FONT></DIV>
</font>
<Font style='font-size:10.0pt; color:windowtext' face="Times New Roman" size="2">

<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>
  <strong>N</strong></font><strong><Font style='color:windowtext' face="Times New Roman" size="3">otes
  to the Financial Statements</font></strong><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2"><HR align=center width="100%" color=#000000 noShade SIZE=2>
</DIV>
</TD></TR></TABLE></DIV>
<DIV><BR></font>
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  </DIV>
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<p>
<Font style='font-size:10.0pt;font-family:Symbol;layout-grid-mode:line; color:windowtext' face="Times New Roman">

<FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In addition to amortization, the Company wrote off $37,798, $-0- and $58,138 of patent costs during the years ended September 30, 2004, 2003 and 2002, respectively.</FONT></font></p>

  </FONT></font></font><DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%" style="border-left-width: 0; border-right-width: 0">
<TR>
<TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" vAlign=bottom align=left width="73%" colSpan=5>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Estimated Amortization Expense Years Ended September 30,</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
&nbsp;</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2005</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">105,239 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2006</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">105,239 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2007</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">105,239 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2008</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">105,239 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2009</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">105,239 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Thereafter</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">752,512 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%">
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>4. INCOME TAXES</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%" colSpan=2>
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%" colSpan=2>
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="11%" colSpan=2>
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%" colSpan=2>
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%" colSpan=2>
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="11%" colSpan=2>
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Income taxes consisted of the following:</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%" colSpan=2>
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%" colSpan=2>
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="11%" colSpan=2>
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Years Ended September 30,</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>2004 </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>2003 </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>2002 </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Deferred (benefit)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Federal</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(2,033,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(2,801,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(2,053,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="57%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">State</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(359,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(494,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(362,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(2,392,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(3,295,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(2,415,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="57%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Change in valuation allowance</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,392,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3,295,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,415,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<Font style='font-size:10.0pt;font-family:Symbol;layout-grid-mode:line; color:windowtext' face="Times New Roman">

<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV>
</font>



</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="11%">
<Font style='font-size:10.0pt;font-family:Symbol;layout-grid-mode:line; color:windowtext' face="Times New Roman">

<FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT>
</font>



</TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="100%" colSpan=11>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">A reconciliation of income taxes at the federal statutory rate of 34% to the effective tax rate is as follows:</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Years Ended September 30,</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>2004 </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>2003 </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>2002 </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Income taxes (benefit) computed at the</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">federal statutory rate</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(2,027,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(2,797,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(2,795,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Tax effect of change in valuation allowance</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,392,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3,019,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,415,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Nondeductible
  expenses,</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">interest expense and other</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">30,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">306,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">957,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">State income taxes (benefit), net of federal tax benefit</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(358,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(494,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(493,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Other</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(37,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(34,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(84,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="57%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<Font style='font-size:10.0pt;font-family:Symbol;layout-grid-mode:line; color:windowtext' face="Times New Roman">

<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV>
</font>



</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<Font style='font-size:10.0pt;font-family:Symbol;layout-grid-mode:line; color:windowtext' face="Times New Roman">

<FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT>
</font>



</TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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, 2004 and 2003 are as follows:</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%" style="border-right-width: 0">
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Deferred tax assets:</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>2004 </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>2003 </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Net operating loss carryforwards</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14,982,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12,382,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Research and development credit</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">228,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">220,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Equipment</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">75,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">176,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Patents</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">59,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">47,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Purchased technology</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">75,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">93,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Accruals and other</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">365,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">294,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="71%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Allowances</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">46,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Gross deferred tax asset</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">15,830,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">13,222,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="71%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Less valuation allowance</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(15,830,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: thin solid #000000; ; border-right-style:none; border-right-width:medium" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(13,222,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
</font>



<Font style='font-size:10.0pt;layout-grid-mode:line; color:windowtext'>

<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<Font style='font-size:10.0pt;font-family:Symbol;layout-grid-mode:line; color:windowtext' face="Times New Roman">

<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></font>



</TD>
</font>



<Font style='font-size:10.0pt;layout-grid-mode:line; color:windowtext'>

<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="11%">-&nbsp;</TD>
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<Font style='font-size:10.0pt;font-family:Symbol;layout-grid-mode:line; color:windowtext'>

<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium solid #ffffff; ; border-top-style:none; border-top-width:medium" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>
  <Font style='font-size:10.0pt; color:windowtext; font-family:Symbol' face="Times New Roman" size="2">
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<DIV>
<TABLE id=PGBRK2 cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD align=left width="33%"><FONT size=1>&nbsp;</FONT></TD>
<TD align=middle width="34%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">
F-16</FONT></TD>
<TD align=right width="33%"><FONT size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD style="PAGE-BREAK-AFTER: always" width="100%" colSpan=3><FONT size=1>
<HR style="PAGE-BREAK-AFTER: always" color=black noShade SIZE=1>
</FONT></TD></TR></TABLE></DIV>
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<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation</STRONG></FONT></DIV>
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<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>
  <strong>N</strong></font><strong><Font style='color:windowtext' face="Times New Roman" size="3">otes
  to the Financial Statements</font></strong><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2"><HR align=center width="100%" color=#000000 noShade SIZE=2>
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  </DIV>
</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The utilization of the net operating loss carryforwards and research and experimental credits could be substantially limited due to restrictions imposed under federal and state laws upon a change of ownership. The amount of the limitation, if any, has not been determined at this time.</FONT></DIV>
<DIV><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">At September 30, 2004, the Company, for federal income tax purposes, has net operating loss carryforwards of approximately $37,400,000, which expire through 2025 of which certain amounts are subject to limitations under the Internal Revenue Code of 1986, as amended.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>5. CAPITAL STOCK</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><U>Common Stock</U></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 the Company sells common stock equivalents, as defined, below $6.75.
  Offering costs were $545,000. </FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><U>Preferred Stock</U></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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></DIV>
<DIV><BR></DIV>
<DIV>
<TABLE id=PGBRK cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR vAlign=top>
<TD width="100%" colSpan=3><FONT id=TAB2 style="COLOR: black; LETTER-SPACING: 207pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;</TD></TR>
<TR>
<TD align=left width="33%"><FONT size=1>&nbsp;</FONT></TD>
<TD align=middle width="34%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">
F-17</FONT></TD>
<TD align=right width="33%"><FONT size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD width="100%" colSpan=3><FONT size=1>
<HR style="PAGE-BREAK-AFTER: always" color=black noShade SIZE=1>
</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=HDR cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD vAlign=bottom width="100%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>Notes to the Financial Statements</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>
<HR align=center width="100%" color=#000000 noShade SIZE=2>
<BR></DIV></TD></TR></TABLE></DIV>
<DIV><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The following is a summary of the terms of the preferred stock series outstanding during the three fiscal years ended September 30, 2004.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="100%">
<TR>
<TD vAlign=bottom align=left width="11%">&nbsp;</TD>
<TD vAlign=bottom align=left width="11%">&nbsp;</TD>
<TD vAlign=bottom align=left width="11%">&nbsp;</TD>
<TD vAlign=bottom align=left width="12%">&nbsp;</TD>
<TD vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD vAlign=bottom align=left width="23%">&nbsp;</TD></TR>
<TR>
<TD vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG></STRONG></FONT>&nbsp;</DIV></TD>
<TD vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG></STRONG></FONT>&nbsp;</DIV></TD>
<TD vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG></STRONG></FONT>&nbsp;</DIV></TD>
<TD vAlign=top align=middle width="12%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Number of </STRONG></FONT></DIV></TD>
<TD vAlign=top align=middle width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG></STRONG></FONT>&nbsp;</DIV></TD>
<TD vAlign=top align=middle width="23%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG></STRONG></FONT>&nbsp;</DIV></TD></TR>
<TR>
<TD vAlign=top align=middle width="11%">&nbsp;</TD>
<TD vAlign=top align=middle width="11%">&nbsp;</TD>
<TD vAlign=bottom align=left width="11%">&nbsp;</TD>
<TD vAlign=bottom align=middle width="12%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Shares</STRONG></FONT></DIV></TD>
<TD vAlign=bottom align=middle width="1%">&nbsp;</TD>
<TD vAlign=top align=middle width="23%">&nbsp;</TD></TR>
<TR>
<TD vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Preferred</STRONG></FONT></DIV></TD>
<TD vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Issuance</STRONG></FONT></DIV></TD>
<TD vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Aggregate</STRONG></FONT></DIV></TD>
<TD vAlign=top align=middle width="12%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Authorized/</STRONG></FONT></DIV></TD>
<TD vAlign=top align=middle width="1%">&nbsp;</TD>
<TD vAlign=top align=middle width="23%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Series</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Date</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Purchase Price</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=top align=middle width="12%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Issued</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=top align=middle width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG></STRONG></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=top align=middle width="23%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Terms</STRONG></FONT></DIV></TD></TR>
<TR>
<TD vAlign=top align=middle width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6% Series B issued at $10.00 per share</FONT></DIV></TD>
<TD vAlign=top align=middle width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">December 1998 and January 1999</FONT></DIV></TD>
<TD vAlign=top align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$2,500,000 </FONT></DIV></TD>
<TD vAlign=top align=right width="12%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">250,000/250,000</FONT></DIV></TD>
<TD vAlign=top align=right width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD vAlign=top align=left width="23%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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></DIV></TD></TR>
<TR>
<TD vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6% Series C issued at $20.00 per share</FONT></DIV></TD>
<TD vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">March 2000</FONT></DIV></TD>
<TD vAlign=top align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$6,000,000 </FONT></DIV></TD>
<TD vAlign=top align=right width="12%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">300,000/300,000</FONT></DIV></TD>
<TD vAlign=top align=right width="1%">&nbsp;</TD>
<TD vAlign=top align=left width="23%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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></DIV></TD></TR>
<TR>
<TD vAlign=top align=middle width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6% Series D issued at $10.00 per share</FONT></DIV></TD>
<TD vAlign=top align=middle width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">May 2002</FONT></DIV></TD>
<TD vAlign=top align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$2,354,000 </FONT></DIV></TD>
<TD vAlign=top align=right width="12%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">250,000/235,400</FONT></DIV></TD>
<TD vAlign=top align=right width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD vAlign=top align=left width="23%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 March 31, 2006.</FONT></DIV></TD></TR>
<TR>
<TD vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6% Series E issued at $10.00 per share</FONT></DIV></TD>
<TD vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">March 2003</FONT></DIV></TD>
<TD vAlign=top align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$3,432,500 </FONT></DIV></TD>
<TD vAlign=top align=right width="12%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">350,000/343,250</FONT></DIV></TD>
<TD vAlign=top align=right width="1%">&nbsp;</TD>
<TD vAlign=top align=left width="23%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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></DIV></TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">At September 30, 2004 all of the Series B and Series C Stock had been converted into common stock. At September 30, 2004 the remaining 50,000 shares of Series D Stock would have been convertible into 127,222 shares of common stock and the remaining 233,250 shares of Series E Stock would have been convertible into 786,473 shares of common stock.</FONT></DIV>
<DIV><BR></DIV>
<DIV>
<TABLE id=PGBRK cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR vAlign=top>
<TD width="100%" colSpan=3>&nbsp;<FONT id=TAB2 style="COLOR: black; LETTER-SPACING: 207pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;</TD></TR>
<TR>
<TD align=left width="33%"><FONT size=1>&nbsp;</FONT></TD>
<TD align=middle width="34%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">
F-18</FONT></TD>
<TD align=right width="33%"><FONT size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD width="100%" colSpan=3><FONT size=1>
<HR style="PAGE-BREAK-AFTER: always" color=black noShade SIZE=1>
</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=HDR cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD vAlign=bottom width="100%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>Notes to the Financial Statements</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>
<HR align=center width="100%" color=#000000 noShade SIZE=2>
<BR></DIV></TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 </FONT><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 </FONT><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">period of the preferred st
ock. 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></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV>
<TABLE cellSpacing=0 cellPadding=0 width="100%">
<TR>
<TD vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG></STRONG></FONT>&nbsp;</DIV></TD>
<TD vAlign=top align=middle width="13%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG></STRONG></FONT>&nbsp;</DIV></TD>
<TD vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG></STRONG></FONT>&nbsp;</DIV></TD>
<TD vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG></STRONG></FONT>&nbsp;</DIV></TD>
<TD vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG></STRONG></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=top align=middle width="22%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Deemed Dividend</STRONG></FONT></DIV></TD></TR>
<TR>
<TD vAlign=top align=middle width="11%">&nbsp;</TD>
<TD vAlign=top align=middle width="13%">&nbsp;</TD>
<TD vAlign=top align=middle width="11%">&nbsp;</TD>
<TD vAlign=top align=middle width="11%">&nbsp;</TD>
<TD vAlign=top align=middle width="11%">&nbsp;</TD>
<TD vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Value </STRONG></FONT></DIV></TD>
<TD vAlign=bottom align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Value Of</STRONG></FONT></DIV></TD></TR>
<TR>
<TD vAlign=top align=middle width="11%">&nbsp;</TD>
<TD vAlign=top align=middle width="13%">&nbsp;</TD>
<TD vAlign=bottom align=left width="11%">&nbsp;</TD>
<TD vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Warrant</STRONG></FONT></DIV></TD>
<TD vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Warrant</STRONG></FONT></DIV></TD>
<TD vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Assigned</STRONG></FONT></DIV></TD>
<TD vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Beneficial</STRONG></FONT></DIV></TD></TR>
<TR>
<TD vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Preferred</STRONG></FONT></DIV></TD>
<TD vAlign=top align=middle width="13%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Issuance</STRONG></FONT></DIV></TD>
<TD vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Number </STRONG></FONT></DIV></TD>
<TD vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Exercise </STRONG></FONT></DIV></TD>
<TD vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Expiration</STRONG></FONT></DIV></TD>
<TD vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>To </STRONG></FONT></DIV></TD>
<TD vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Conversion </STRONG></FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Series</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=top align=middle width="13%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Date</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Of Warrants</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Price</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Date</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Warrants</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Discount</STRONG></FONT></DIV></TD></TR>
<TR>
<TD vAlign=bottom align=middle width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6% Series B</FONT></DIV></TD>
<TD vAlign=bottom align=middle width="13%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">December 1998 and January 1999</FONT></DIV></TD>
<TD vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">250,000</FONT></DIV></TD>
<TD vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$6.00 </FONT></DIV></TD>
<TD vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11/30/2001</FONT></DIV></TD>
<TD vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$595,000 </FONT></DIV></TD>
<TD vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$656,000 </FONT></DIV></TD></TR>
<TR>
<TD vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6% Series C</FONT></DIV></TD>
<TD vAlign=top align=middle width="13%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">March 2000</FONT></DIV></TD>
<TD vAlign=top align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">300,000</FONT></DIV></TD>
<TD vAlign=top align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$11.00 </FONT></DIV></TD>
<TD vAlign=top align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3/31/2003</FONT></DIV></TD>
<TD vAlign=top align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$1,478,000 </FONT></DIV></TD>
<TD vAlign=top align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$2,509,000 </FONT></DIV></TD></TR>
<TR>
<TD vAlign=top align=middle width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6% Series D </FONT></DIV></TD>
<TD vAlign=top align=middle width="13%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">May 2002</FONT></DIV></TD>
<TD vAlign=top align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">517,880</FONT></DIV></TD>
<TD vAlign=top align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$3.01 </FONT></DIV></TD>
<TD vAlign=top align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3/31/2007</FONT></DIV></TD>
<TD vAlign=top align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$1,029,519 </FONT></DIV></TD>
<TD vAlign=top align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$994,310 </FONT></DIV></TD></TR>
<TR>
<TD vAlign=top align=middle width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6% Series E </FONT></DIV></TD>
<TD vAlign=top align=middle width="13%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">March 2003</FONT></DIV></TD>
<TD vAlign=top align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">514,875</FONT></DIV></TD>
<TD vAlign=top align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$3.25 </FONT></DIV></TD>
<TD vAlign=top align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12/31/2007</FONT></DIV></TD>
<TD vAlign=top align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$755,500 </FONT></DIV></TD>
<TD vAlign=top align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$2,677,000 </FONT></DIV></TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The following table summarizes information about the deemed dividend activity commencing in May 2002.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV><BR></DIV>
<DIV>
<TABLE id=PGBRK cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR vAlign=top>
<TD width="100%" colSpan=3>&nbsp;<FONT id=TAB2 style="COLOR: black; LETTER-SPACING: 207pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;</TD></TR>
<TR>
<TD align=left width="33%"><FONT size=1>&nbsp;</FONT></TD>
<TD align=middle width="34%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">
F-19</FONT></TD>
<TD align=right width="33%"><FONT size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD width="100%" colSpan=3><FONT size=1>
<HR style="PAGE-BREAK-AFTER: always" color=black noShade SIZE=1>
</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=HDR cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD vAlign=bottom width="100%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>Notes to the Financial Statements</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>
<HR align=center width="100%" color=#000000 noShade SIZE=2>
<BR></DIV></TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>&nbsp;</DIV>
<DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%">
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="43%" bgcolor="#FFFFFF">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=middle width="43%" colSpan=11>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Number</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=middle width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Balance</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Series D</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG></STRONG></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Series E</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG></STRONG></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>of</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Preferred</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Series D</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Preferred</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Series E</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Deemed</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Shares</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Warrants</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Shares</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Warrants</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Dividend</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Series D Issued in May 2002</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">235,400 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">517,880 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,865,310 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Fiscal 2002 accretion</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(195,936</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Balance September 30, 2002</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">235,400 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">517,880 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,669,374 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Series E Issued in February 2003</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">343,250 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">514,875 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3,432,500 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Additional deemed dividend</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">on D warrant repricing</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
  -</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
  -</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
  -</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
  -</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">158,519 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Deemed dividend on</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">warrants exercised</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
  -</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(22,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
  -</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(120,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(215,904</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Deemed dividend on </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">preferred stock converted</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(185,400</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(80,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1,324,224</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Accretion on outstanding</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Series D and E warrants</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
  -</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
  -</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
  -</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
  -</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(322,166</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Accretion on outstanding</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Series D and E Preferred Stock</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
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<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
  -</DIV></TD>



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<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>



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<Font style='font-size:10.0pt; color:windowtext' size="2" face="Times New Roman">

<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
  -</DIV></TD>



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<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' size="2" face="Times New Roman">

<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
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<Font style='font-size:10.0pt; color:windowtext' size="2" face="Times New Roman">

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- -</TD>



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<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' size="2" face="Times New Roman">

<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>



</font>



<Font style='font-size:10.0pt; color:windowtext' size="2" face="Times New Roman">

<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="9%">
- -</TD>



</font>



<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' size="2" face="Times New Roman">

<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(359,276</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Balance September 30, 2003</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">50,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">495,880 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">263,250 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">394,875 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3,038,823 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Deemed dividend on</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">warrants exercised</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
  -</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
  -</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(30,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(44,630</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Deemed dividend on </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">preferred stock converted</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(30,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(192,699</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Accretion on outstanding</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Series D and E warrants</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
  -</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
  -</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
  -</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
  -</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(403,942</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Accretion on outstanding</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Series D and E Preferred Stock</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
  -</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
  -</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
  -</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
  -</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(543,750</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Balance September 30, 2004</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">50,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">495,880 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">233,250 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">364,875 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,853,802 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="56%" colSpan=5>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Deemed dividend accretion fiscal 2004:</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Series D and E Warrants</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;&nbsp;&nbsp; </TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(448,572</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Series D and E Preferred Stock</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(736,449</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR>



<Font style='font-size:10.0pt;font-family:Symbol;layout-grid-mode:line; color:windowtext' size="2" face="Times New Roman">

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<TD width="100%" colSpan=3>&nbsp;<FONT id=TAB4 style="COLOR: black; LETTER-SPACING: 207pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;</TD></TR>
<TR>
<TD align=left width="33%"><FONT size=1>&nbsp;</FONT></TD>
<TD align=middle width="34%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">
F-20</FONT></TD>
<TD align=right width="33%"><FONT size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD width="100%" colSpan=3><FONT size=1>
<HR style="PAGE-BREAK-AFTER: always" color=black noShade SIZE=1>
</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=HDR4 cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD vAlign=bottom width="100%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>Notes to the Financial Statements</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>
<HR align=center width="100%" color=#000000 noShade SIZE=2>
<p>
<BR></DIV></TD></TR></TABLE></DIV>
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</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><U>Stock Purchase Warrants</U></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">A summary of the status of outstanding stock purchase warrants outstanding as of September 30, 2002, 2003 and 2004 and the changes during the years then ended is presented below:</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%">
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG></STRONG></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Average</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG></STRONG></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Purchase </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Number</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Price</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Shares purchasable under outstanding warrants at October 1, 2001</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,115,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.87 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Stock purchase warrants issued</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,230,380 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.26 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Stock purchase warrants exercised</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Stock purchase warrants expired</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(240,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.00 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Shares purchasable under outstanding warrants at September 30, 2002</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,105,380 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.85 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Stock purchase warrants issued</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,019,422 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.83 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Stock purchase warrants exercised</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(347,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.60 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Stock purchase warrants expired</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(350,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11.71 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Shares purchasable under outstanding warrants at September 30, 2003</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,427,802 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.85 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Stock purchase warrants exercised</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(25,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.00 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="71%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Stock purchase warrants expired</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(50,000</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.00 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Shares purchasable under outstanding warrants at September 30, 2004</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,352,802 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.74 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV>
<TABLE id=PGBRK cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR vAlign=top>
<TD width="100%" colSpan=3>&nbsp;<FONT id=TAB2 style="COLOR: black; LETTER-SPACING: 207pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;</TD></TR>
<TR>
<TD align=left width="33%"><FONT size=1>&nbsp;</FONT></TD>
<TD align=middle width="34%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">F-21</FONT></TD>
<TD align=right width="33%"><FONT size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD width="100%" colSpan=3><FONT size=1>
<HR style="PAGE-BREAK-AFTER: always" color=black noShade SIZE=1>
</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=HDR cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD vAlign=bottom width="100%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>Notes to the Financial Statements</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>
<HR align=center width="100%" color=#000000 noShade SIZE=2>
<BR></DIV></TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">At September 30, 2004, the following stock purchase warrants were outstanding arising from offerings and other transactions, each exercisable into one common share:</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="61%" style="border-left-width: 0">
<TR>
<TD vAlign=bottom align=middle width="5%" style="border-bottom-style: none; border-bottom-width: medium">
&nbsp;</TD>
<TD vAlign=bottom align=middle width="5%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG></STRONG></FONT>&nbsp;</DIV></TD>
<TD vAlign=bottom align=middle width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center>&nbsp;</DIV></TD>
<TD vAlign=bottom align=middle width="7%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Exercise</STRONG></FONT></DIV></TD>
<TD vAlign=bottom align=middle width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center>&nbsp;</DIV></TD>
<TD vAlign=bottom align=middle width="10%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Expiration</STRONG></FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none black; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" vAlign=bottom align=middle width="5%">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: thin solid black; ; border-left-style:none; border-left-width:medium" vAlign=bottom align=middle width="5%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Number</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=middle width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG></STRONG></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=middle width="7%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Price</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=middle width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=middle width="10%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Date</STRONG></FONT></DIV></TD></TR>
<TR>
<TD vAlign=bottom align=left width="5%" style="border-top-style: none; border-top-width: medium">
&nbsp;</TD>
<TD vAlign=bottom align=left width="5%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD vAlign=bottom align=left width="7%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD vAlign=bottom align=left width="10%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD></TR>
<TR>
<TD vAlign=bottom align=left width="5%">
&nbsp;</TD>
<TD vAlign=bottom align=left width="5%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">75,000 </FONT></DIV></TD>
<TD vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>&nbsp;</DIV></TD>
<TD vAlign=bottom align=right width="7%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$11.00 </FONT></DIV></TD>
<TD vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>&nbsp;</DIV></TD>
<TD vAlign=bottom align=right width="10%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">March 31, 2005</FONT></DIV></TD></TR>
<TR>
<TD vAlign=bottom align=left width="5%">
&nbsp;</TD>
<TD vAlign=bottom align=left width="5%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">812,500 </FONT></DIV></TD>
<TD vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD vAlign=bottom align=right width="7%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$2.00 </FONT></DIV></TD>
<TD vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD vAlign=bottom align=right width="10%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">September 30, 2006</FONT></DIV></TD></TR>
<TR>
<TD vAlign=bottom align=left width="5%">
&nbsp;</TD>
<TD vAlign=bottom align=left width="5%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">495,880 </FONT></DIV></TD>
<TD vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>&nbsp;</DIV></TD>
<TD vAlign=bottom align=right width="7%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$3.01 </FONT></DIV></TD>
<TD vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>&nbsp;</DIV></TD>
<TD vAlign=bottom align=right width="10%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">March 31, 2007</FONT></DIV></TD></TR>
<TR>
<TD vAlign=bottom align=left width="5%">
&nbsp;</TD>
<TD vAlign=bottom align=left width="5%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">454,547 </FONT></DIV></TD>
<TD vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD vAlign=bottom align=right width="7%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$6.75 </FONT></DIV></TD>
<TD vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD vAlign=bottom align=right width="10%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">July 10, 2007</FONT></DIV></TD></TR>
<TR>
<TD vAlign=bottom align=left width="5%">
&nbsp;</TD>
<TD vAlign=bottom align=left width="5%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">100,000 </FONT></DIV></TD>
<TD vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>&nbsp;</DIV></TD>
<TD vAlign=bottom align=right width="7%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$4.25 </FONT></DIV></TD>
<TD vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>&nbsp;</DIV></TD>
<TD vAlign=bottom align=right width="10%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">September 30, 2007</FONT></DIV></TD></TR>
<TR>
<TD vAlign=bottom align=left width="5%" style="border-bottom-style: none; border-bottom-width: medium">
&nbsp;</TD>
<TD vAlign=bottom align=left width="5%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">364,875 </FONT></DIV></TD>
<TD vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD vAlign=bottom align=right width="7%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$3.25 </FONT></DIV></TD>
<TD vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD vAlign=bottom align=right width="10%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">December 31, 2007</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" vAlign=bottom align=left width="5%">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: thin solid #000000; ; border-left-style:none; border-left-width:medium" vAlign=bottom align=left width="5%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">50,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="7%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$3.63 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="10%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">April 8, 2008</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none black; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" vAlign=bottom align=left width="5%">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium double black; ; border-left-style:none; border-left-width:medium" vAlign=bottom align=left width="5%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,352,802 </FONT></DIV></TD>
<TD vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD vAlign=bottom align=left width="7%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD vAlign=bottom align=left width="10%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD></TR>
<TR>
<TD vAlign=bottom align=left width="5%" style="border-top-style: none; border-top-width: medium">
&nbsp;</TD>
<TD vAlign=bottom align=left width="5%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD vAlign=bottom align=left width="7%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD vAlign=bottom align=left width="10%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD></TR>
<TR>
<TD vAlign=bottom align=left width="5%">
&nbsp;</TD>
<TD vAlign=bottom align=left width="5%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD vAlign=bottom align=left width="7%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD vAlign=bottom align=left width="10%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>6. BENEFIT PLANS</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><U>2002 Stock Option Plan</U></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The Company has a Stock Option Plan, expiring September 30, 2012, reserving the issuance of 2,350,000 shares of common stock ("2002 Plan"). 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 subject to Incentive Stock Options 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 either five or ten years of the dat
e they were granted (five years in the case of an Incentive Stock Option to a significant stockholder). </FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As of September 30, 2004, there were options outstanding covering 1,268,498 shares of common stock under the 2002 Plan. Shares subject to options under the 1997 Plan or the 2002 Plan that expire, are cancelled or are terminated without being exercised, become available for future grants under the 2002 Plan. Accordingly, there were
  284,928 shares available for future option grants under the 2002 Plan at September 30, 2004.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><U>1997 Stock Option Plan </U></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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, 2004, there were options outstanding covering 384,000 shares of common stock under this Plan.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><U>Other Employee Stock Options</U></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">During fiscal year ended September 30, 2004 the Company granted options to purchase 147,000 shares of common stock, exercisable at prices ranging from $5.92 to $6.14 per share, outside the above plans as inducements to employment to new employees. During the fiscal year ended September 30, 2002, the Company granted to two employees options to purchase an aggregate of 200,000 shares of common stock, exercisable at $4.50 per share until April 25, 2006. As of September 30, 2004 there were options remaining outstanding covering 187,000 shares of common stock from grants outside the 1997 and 2002 Plans.</FONT></DIV>
<DIV>
<TABLE id=PGBRK cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR vAlign=top>
<TD width="100%" colSpan=3><FONT id=TAB2 style="COLOR: black; LETTER-SPACING: 207pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;</TD></TR>
<TR>
<TD align=left width="33%"><FONT size=1>&nbsp;</FONT></TD>
<TD align=middle width="34%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">F-22</FONT></TD>
<TD align=right width="33%"><FONT size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD width="100%" colSpan=3><FONT size=1>
<HR style="PAGE-BREAK-AFTER: always" color=black noShade SIZE=1>
</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=HDR cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD vAlign=bottom width="100%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>Notes to the Financial Statements</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>
<HR align=center width="100%" color=#000000 noShade SIZE=2>
<BR></DIV></TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><U>1997 Employee Stock Compensation Plan (&#147;ESC&#148;)</U></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Effective March 10, 1997, the Company adopted the 1997 Employee Stock Compensation Plan ("ESC Plan"), which was amended on February 22, 2000 to reserve for issuance of an aggregate of 650,000 shares of common stock. The ESC Plan expired March 9, 2002. 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></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">During fiscal 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. </FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><U>Non-Cash Compensation Expense</U></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">During the fiscal year ended September 30, 2004 the Company recorded non-cash compensation expense of $65,863 for the extension of certain option exercise periods to former employees on an aggregate of 28,438 shares of common stock. For the fiscal year ended September 30, 2003, the Company recorded non-cash compensation expense of $25,597 for the granting of options to purchase 13,000 shares of common stock 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 options to purchase 55,000 shares of common stock under its stock options plans to non-employees.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In October 2001, the Company granted options to purchase a total of 110,000 shares of common stock to a consultant under the 1997 Plan in conjunction with related development and manufacturing agreements. The stock options include options to purchase 65,000 shares of common stock, which vest upon completion of certain project milestones. The Company has 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 milestone options for 30,000 shares vested in fiscal 2002 and consulting expense of $47,782 
for the Black Scholes value of 10,000 milestone options vested in fiscal 2003. As of September 30, 2004 there remain stock options to purchase 25,000 shares that are non-vested due to unmet project milestones. In addition there were options to purchase 45,000 shares of common stock that vested based on the consultant meeting certain performance criteria. The Company records consulting expense at each vesting date. The Company recorded consulting expense of $96,655 for the Black Scholes value of performance options for 45,000 shares vested during the year ended September 30, 2002.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 this warrant.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 this warrant.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><U>Stock Option Summary Information</U></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">A summary of the status of the Company&#146;s stock option plans as of September 30, 2004, 2003 and 2002 and the changes during the years ended on those dates is presented below:</FONT></DIV>
<DIV><BR></DIV>
<DIV>
<TABLE id=PGBRK cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR vAlign=top>
<TD width="100%" colSpan=3>&nbsp;<FONT id=TAB2 style="COLOR: black; LETTER-SPACING: 207pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;</TD></TR>
<TR>
<TD align=left width="33%"><FONT size=1>&nbsp;</FONT></TD>
<TD align=middle width="34%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">F-23</FONT></TD>
<TD align=right width="33%"><FONT size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD width="100%" colSpan=3><FONT size=1>
<HR style="PAGE-BREAK-AFTER: always" color=black noShade SIZE=1>
</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=HDR cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD vAlign=bottom width="100%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>Notes to the Financial Statements</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>
<HR align=center width="100%" color=#000000 noShade SIZE=2>
&nbsp;</DIV></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%" style="border-collapse: collapse" bordercolor="#111111">
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="10%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="10%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="10%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="10%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Weighted</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="10%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="10%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="10%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Number </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="10%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Average</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Fiscal 2002:</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="10%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="10%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="10%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="10%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="10%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="56%" colSpan=5 bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Outstanding October 1, 2001</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,338,200 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.23 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Granted</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">510,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.97 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="56%" colSpan=5 bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Canceled/expired</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(382,775</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">8.17 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<tr>
  <Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'><Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal'>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exercised</FONT></DIV></TD>

</font>
  </font>



  <Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'><Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal'>
<TD style="BORDER-BOTTOM: #ffffff solid" width="2%">&nbsp;</TD>

</font>
  </font>



  <Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'><Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal'>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>

</font>
  </font>



  <Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'><Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal'>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%">&nbsp;</TD>

</font>
  </font>



  <Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'><Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal'>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD>

</font>
  </font>



  <Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'><Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal'>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>

</font>
  </font>



  <Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'><Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal'>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%">&nbsp;</TD>

</font>
  </font>



  <Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'><Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal'>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD>

</font>
  </font>



  <Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'><Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal'>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>

</font>
  </font>



  <Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'><Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal'>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%">&nbsp;</TD>

</font>
  </font>



  <Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'><Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal'>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD>

</font>
  </font>



  <Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'><Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal'>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>

</font>
  </font>



  <Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'><Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal'>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(6,250</FONT></DIV></TD>

</font>
  </font>



  <Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'><Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal'>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>

</font>
  </font>



  <Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'><Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal'>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>

</font>
  </font>



  <Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'><Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal'>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.00 </FONT></DIV></TD>

</font>
  </font>



  <Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'><Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal'>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD>

</font>
  </font>



</tr>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="56%" colSpan=5 bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Outstanding September 30, 2002</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,459,175 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.97 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="56%" colSpan=5>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exercisable at September 30, 2002</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,090,575 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.93 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="78%" colSpan=11>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Weighted average fair value of options granted during the year</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.37 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Fiscal 2003:</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="56%" colSpan=5 bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Outstanding October 1, 2002</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,459,175 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.97 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Granted</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">979,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.96 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="56%" colSpan=5 bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Canceled/expired</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(416,950</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.86 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exercised</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(408,951</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.95 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="56%" colSpan=5 bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Outstanding September 30, 2003</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,612,274 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.00 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="56%" colSpan=5>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exercisable at September 30, 2003</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">998,722 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.79 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="78%" colSpan=11>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Weighted average fair value of options granted during the year</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.78 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Fiscal 2004:</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="56%" colSpan=5 bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Outstanding October 1, 2003</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,612,274 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.00 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Granted</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,073,500 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.80 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="56%" colSpan=5 bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Canceled/expired</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
  (553,703</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.63 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exercised</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(292,573</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.49 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="56%" colSpan=5 bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Outstanding September 30, 2004</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
  1,839,498 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.68 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="56%" colSpan=5>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exercisable at September 30, 2004</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">&nbsp;</TD>



</font>



</font>



<Font style='font-size:10.0pt;layout-grid-mode:line; color:windowtext'>

<Font style='font-size:10.0pt; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">

<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
  916,884</DIV></TD>



</font></font>



<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman">



<Font style='font-size:10.0pt;font-family:Symbol;layout-grid-mode:line; color:windowtext'>

<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.60 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="78%" colSpan=11>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Weighted average fair value of options granted during the year</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.37 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="100%" colSpan=17>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The following table summarizes information about stock options outstanding at September 30, 2004:<br>
&nbsp;</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>

<Font style='font-size:10.0pt; color:windowtext' face="Times New Roman" size="2">

<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">



<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Weighted </FONT></DIV>

</font>



</TD>

</font>
<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>

</font></font>



<Font style='font-size:10.0pt; color:windowtext'>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">



<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

<FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Average </FONT>

</font>



</TD>
</font>



<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Weighted </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Weighted</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Range of </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Remaining</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Average </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Average</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exercise</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Number </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Contractual</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exercise </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Number </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exercise</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Prices</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Outstanding </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Life</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Price </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exercisable </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Price</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$2.50-$4.00</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">824,998 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.46 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.18 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">706,821 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.16 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$4.01-$5.50</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">434,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
  3.98 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.90 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">172,063 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.67 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$5.51-$7.00</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">441,700 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.62 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.49 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">18,450 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.06 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$7.01-$9.03</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">138,800 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.50 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7.19 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">19,550 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="9%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.72 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$2.50-$9.03</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,839,498 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.27 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.68 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">916,884 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="9%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.60 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="9%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><U>Employee Benefit - 401K Plan</U></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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, 2004, 2003 and 2002, the Company made matching contributions of approximately $28,385, $18,675 and $20,151 respectively.</FONT></DIV>
<DIV>
<TABLE id=PGBRK cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR vAlign=top>
<TD width="100%" colSpan=3>&nbsp;<FONT id=TAB2 style="COLOR: black; LETTER-SPACING: 207pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;</TD></TR>
<TR>
<TD align=left width="33%"><FONT size=1>&nbsp;</FONT></TD>
<TD align=middle width="34%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">F-24</FONT></TD>
<TD align=right width="33%"><FONT size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD width="100%" colSpan=3><FONT size=1>
<HR style="PAGE-BREAK-AFTER: always" color=black noShade SIZE=1>
</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=HDR cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD vAlign=bottom width="100%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>Notes to the Financial Statements</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>
<HR align=center width="100%" color=#000000 noShade SIZE=2>
<BR></DIV></TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>7. COMMITMENTS AND CONTINGENCIES</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><U>Facility Leases</U></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The Company&#146;s executive offices, research and development and operational facilities in San Diego, California, are occupied under a sublease agreement that commenced in January 2004 and expires in July 2006. The Company currently occupies approximately 15,000 square feet of office, laboratory, production and warehouse space in these premises with aggregate monthly payments of approximately $18,000, exclusive of utilities and costs.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 approximately $1,200 excluding utilities.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The Company&#146;s east coast office for its Government Group is located in Topsham, Maine. The Company has a month to month lease effective, October 1, 2004, for 600 square feet of office space with a monthly payment of $919.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><U>Other Operating Leases</U></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In addition to the facility lease, the Company has one automobile lease obligation expiring in May 2006. The Company also has two business equipment leases expiring in January 2009. These leases are reported as operating leases within the financial statements. </FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Total operating lease expense, including facilities, automobile and business equipment leases, recorded by the Company for the years ended September 30, 2004, 2003 and 2002 was $345,330, $206,084 and $197,358, respectively. </FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The obligations under all operating leases are as follows:</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%">
<TR>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="85%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Year ending September 30:</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="85%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2005</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">237,262 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="85%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2006</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">196,832 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="85%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2007</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10,657 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="85%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2008</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10,657 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="85%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2009</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,352 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="85%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><U>Employment Agreements</U></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The Company has no employment agreements with executive officers or other employees providing future benefits or severance arrangements. </FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><U>Commission and Bonus Plans</U></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The Company has established a sales commission plan, which was approved by the Compensation Committee of the Board of Directors and provides cash incentives to certain of the Company&#146;s sales employees based on revenues recognized, provided that revenues are greater than a minimum specified amount. In fiscal 2004, the Company recorded $95,500 of commission expense based on revenues of the Government Group. Because the minimum level was not achieved, no commissions were earned on revenues of the Business Group.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Certain of the Company&#146;s employees, in accordance with their terms of employment, may earn a cash bonus based on the overall financial performance of the Company. Based on the Company&#146;s overall performance, no bonuses were earned for fiscal 2004.</FONT></DIV>
<DIV><BR></DIV>
<DIV>
<TABLE id=PGBRK cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR vAlign=top>
<TD width="100%" colSpan=3>&nbsp;<FONT id=TAB2 style="COLOR: black; LETTER-SPACING: 207pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;</TD></TR>
<TR>
<TD align=left width="33%"><FONT size=1>&nbsp;</FONT></TD>
<TD align=middle width="34%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">F-25</FONT></TD>
<TD align=right width="33%"><FONT size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD width="100%" colSpan=3><FONT size=1>
<HR style="PAGE-BREAK-AFTER: always" color=black noShade SIZE=1>
</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=HDR cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD vAlign=bottom width="100%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>Notes to the Financial Statements</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>
<HR align=center width="100%" color=#000000 noShade SIZE=2>
<BR></DIV></TD></TR></TABLE></DIV>
<DIV><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><U>Litigation</U></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 judgment 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. The principals also founded a corporation, eSOUNDideas, Inc., which purported to assume the contractual obligations of eSOUNDideas. The Company amended the complaint in November 2003 to include eSOUNDideas (the general partnership), Mr. Endsley and Mr. Paschall as defendants. For convenience, the following discussion refers to eSOUNDideas and eSOUNDi
deas, Inc. collectively as &#147;ESI.&#148; In November 2003, the Company filed complaints in the Superior Court of California, County of San Diego, against Mr. Endsley and Mr. Paschall seeking declaratory judgments that options granted to each of Mr. Endsley and Mr. Paschall in April 2001 were terminated in October 2002.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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. 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 Comp
any 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. 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. ESI did not tender a cure within such sixty day period.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The three cases were consolidated upon motion by the defendants and order of the court. The defendants filed a cross-action in the consolidated action alleging fraud, breach of contract in connection with the ESI License Agreement and the options, 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, and violation of California Business and Professions Code &#167;17200.&nbsp; The Company filed its answer to the second amended cross-complaint in August 2004.&nbsp; Discovery is ongoing.&nbsp; Trial has been set for May 2005.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The Company intends to vigorously pursue its complaint against the defendants in this case and to vigorously challenge the defendant&#146;s cross complaint.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Related to the Company&#146;s April 2000 purchase of the NeoPlanar speaker technology, the Company was in dispute with a predecessor owner of the technology regarding a minimum film royalty. In March 2004 the Company settled this matter for a payment of $25,000 and the issuance of 50,000 shares of common stock, which included a buyout of all future royalties.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In February 2004, the Company gave notice of termination of two licensing and sales agreements with General Dynamics Armament and Technical Products, Inc. (GD-ATP), originally entered into in February 2003. GD-ATP was the original licensee under one agreement, and took assignment of the rights of Bath Iron Works Corporation, another subsidiary of General Dynamics Corporation, under the other agreement. The agreements gave GD-ATP the right 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. GD-ATP disputed the Company&#146;s right to terminate the agreements and demand
ed arbitration. In April 2004 the Company announced that it and GD-ATP had mutually agreed to resolve their disputes in an amicable manner, and to dismiss the arbitration proceedings. GD-ATP and the Company agreed that neither was liable to the other and that no party engaged in any wrongdoing. The resolution resulted in the termination of the two agreements, and in the Company assuming GD-ATP&#146;s role in servicing certain LRAD customers previously serviced by GD-ATP.</FONT></DIV>
<DIV><BR></DIV>
<DIV>
<TABLE id=PGBRK cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR vAlign=top>
<TD width="100%" colSpan=3>&nbsp;<FONT id=TAB2 style="COLOR: black; LETTER-SPACING: 207pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;</TD></TR>
<TR>
<TD align=left width="33%"><FONT size=1>&nbsp;</FONT></TD>
<TD align=middle width="34%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">F-26</FONT></TD>
<TD align=right width="33%"><FONT size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD width="100%" colSpan=3><FONT size=1>
<HR style="PAGE-BREAK-AFTER: always" color=black noShade SIZE=1>
</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=HDR cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD vAlign=bottom width="100%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>Notes to the Financial Statements</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>
<HR align=center width="100%" color=#000000 noShade SIZE=2>
<BR></DIV></TD></TR></TABLE></DIV>
<DIV><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 aquired 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></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The Company may at times be involved in litigation in the ordinary course of business. The Company will also, from time to time, when appropriate in management&#146;s estimation, record adequate reserves in the Company&#146;s financial statements for pending litigation. 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></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><U>Royalties</U></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The Company is obligated to pay a $2.50 per unit royalty to an officer/director on one electronic component for its HSS product. The Company is also obligated to pay an officer/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, 2004, 2003 or 2002, as such royalties were waived by the officer and director. The Company may owe royalties in future periods based on actual sales or technology revenues.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>8. </STRONG></FONT><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>WARRANTY RESERVE</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%">
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="85%" colSpan=4>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Details of the estimated warranty liability are as follows:</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Fiscal Year Ending September 30:</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2004 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2003 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Beginning balance</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">319,500 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6,313 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Warranty provision</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">101,671 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">313,187 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="71%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Warranty deductions</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(89,254</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Ending balance</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">331,917 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">319,500 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>9. EQUIPMENT UNDER CAPITAL LEASE</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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, 2004 are as follows:</FONT></DIV>
<DIV><BR></DIV>
<DIV>
<TABLE id=PGBRK cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR vAlign=top>
<TD width="100%" colSpan=3>&nbsp;<FONT id=TAB2 style="COLOR: black; LETTER-SPACING: 207pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;</TD></TR>
<TR>
<TD align=left width="33%"><FONT size=1>&nbsp;</FONT></TD>
<TD align=middle width="34%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">F-27</FONT></TD>
<TD align=right width="33%"><FONT size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD width="100%" colSpan=3><FONT size=1>
<HR style="PAGE-BREAK-AFTER: always" color=black noShade SIZE=1>
</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=HDR cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD vAlign=bottom width="100%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>Notes to the Financial Statements</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>
<HR align=center width="100%" color=#000000 noShade SIZE=2>
<BR></DIV></TD></TR></TABLE></DIV>
<DIV><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%">
<TR>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="85%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Year ending September 30:</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="85%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2005 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12,806 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="85%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2006 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12,806 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="85%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Total:</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">25,612 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="85%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="85%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Total future minimum lease payments</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">25,612 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="85%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Less amounts representing interest</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(2,514</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="85%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Present value of minimum lease payments</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">23,098 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="85%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Less current maturities</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(10,967</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="85%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Total long-term obligations</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12,131 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="85%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">At September 30, 2004, there was property and equipment under capital lease obligations with a total cost of $50,041 and accumulated amortization of $36,697.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>10. MAJOR CUSTOMERS</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For the fiscal year ended September 30, 2004, revenues from two customers, both of which are in the Government Group, accounted for 47% and 11% of revenues with no other single customer accounting for more than 10% of revenues. For the fiscal year ended September 30, 2003, revenues from one individual customer in the Government Group accounted for 24% of total revenue. For the fiscal year ended September 30, 2002, revenues from a customer in the Government Group accounted for 19% of total revenue, and two customers in the Business Group accounted for 12% and 11% of total revenue.
  <br>
&nbsp;</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">At September 30, 2004, accounts receivable from three individual customers accounted for 52%, 19% and 13% of total accounts receivable with no other single customer accounting for more than 10% of the accounts receivable balance. At September 30, 2003, accounts receivable from three individual customers accounted for 53%, 18% and 12% of the accounts receivable balance.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>11. SUPPLIER AGREEMENTS</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The Company is reliant on one contract manufacturer for production of HSS and LRAD products on a turnkey basis. The Company is currently in the process of negotiating a formal agreement with this contract manufacturer. This manufacturing relationship has no specified term and the Company could be materially impacted if it ceased doing business with this contract manufacturer and was unable to establish other production in a timely manner. At September 30, 2004 the Company had $530,970 of accounts payable to this contract manufacturer. </FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">During fiscal 2004 the Company shipped materials to this contract manufacturer, booked an amount due from contract manufacturer and relieved inventory of $523,080. The Company did not recognize any revenue on these transactions. At September 30, 2004 the remaining balance due from contract manufacturer, for shipments made to them, was $393,636. The contract manufacturer used these materials to build products for the Company.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>12. RELATED PARTY TRANSACTIONS</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On April 19, 2002, the Company offered to stockholders 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></DIV>
<DIV><BR></DIV>
<DIV>
<TABLE id=PGBRK cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR vAlign=top>
<TD width="100%" colSpan=3>&nbsp;<FONT id=TAB2 style="COLOR: black; LETTER-SPACING: 207pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;</TD></TR>
<TR>
<TD align=left width="33%"><FONT size=1>&nbsp;</FONT></TD>
<TD align=middle width="34%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">F-28</FONT></TD>
<TD align=right width="33%"><FONT size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD width="100%" colSpan=3><FONT size=1>
<HR style="PAGE-BREAK-AFTER: always" color=black noShade SIZE=1>
</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=HDR cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD vAlign=bottom width="100%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>Notes to the Financial Statements</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>
<HR align=center width="100%" color=#000000 noShade SIZE=2>
<BR></DIV></TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>13. BUSINESS SEGMENT DATA</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 and NeoPlanar sound products to companies that employ audio in consumer, commercial and professional applications. The Government and Force Protection Systems Group (Government Group) markets LRAD, NeoPlanar, Sound Cluster and HSS sound products to government and military customers and to the expanding force protection and commercial security markets. The segments are ma
naged separately because each segment requires different selling and marketing strategies as the class of customers within each segment is different.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%" style="border-collapse: collapse" bordercolor="#111111">
<TR>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Years Ended September 30,</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=middle width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>2004 </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=middle width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>2003 </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=middle width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>2002 </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Revenues:</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%" colSpan=2 bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%" colSpan=2 bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="11%" colSpan=2 bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Business Group</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">933,373 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">861,091 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">922,542 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Government Group</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: 1px solid; " vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: 1px solid; " vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4,819,176 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: 1px solid; " vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: 1px solid; " vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">454,335 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: 1px solid; " vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: 1px solid; " vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">88,210 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="57%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium double black; ; border-top-style:solid; border-top-width:1" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium double black; ; border-top-style:solid; border-top-width:1" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5,752,549 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium double black; ; border-top-style:solid; border-top-width:1" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium double black; ; border-top-style:solid; border-top-width:1" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,315,426 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium double black; ; border-top-style:solid; border-top-width:1" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium double black; ; border-top-style:solid; border-top-width:1" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,010,752 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Gross Profit (Loss):</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Business Group</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(534,174</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(501,748</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">256,779 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Government Group</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: 1px solid; " vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: 1px solid; " vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,816,902 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: 1px solid; " vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: 1px solid; " vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">273,097 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: 1px solid; " vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: 1px solid; " vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">70,129 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="57%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium double black; ; border-top-style:solid; border-top-width:1" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium double black; ; border-top-style:solid; border-top-width:1" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,282,728 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium double black; ; border-top-style:solid; border-top-width:1" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium double black; ; border-top-style:solid; border-top-width:1" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(228,651</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium double black; ; border-top-style:solid; border-top-width:1" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium double black; ; border-top-style:solid; border-top-width:1" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">326,908 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%" height="104" style="border-collapse: collapse" bordercolor="#111111">
<TR>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="71%" height="20">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Year Ended September 30,</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%" height="20">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=middle width="12%" colSpan=2 height="20">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>2004 </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%" height="20">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=middle width="11%" colSpan=2 height="20">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>2003 </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%" height="20">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%" bgcolor="#CBDBD1" height="20">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Revenues:</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1" height="20">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1" height="20">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1" height="20">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1" height="20">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1" height="20">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1" height="20">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1" height="20">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%" height="20">
<DIV style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">United States</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" height="20">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" height="20">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" height="20">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5,675,088 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" height="20">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" height="20">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" height="20">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,167,120 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" height="20">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%" bgcolor="#CBDBD1" height="20">
<DIV style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Other</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1" height="20">&nbsp;</TD>
<TD style="BORDER-BOTTOM: 1px solid; " vAlign=bottom align=left width="1%" bgcolor="#CBDBD1" height="20">&nbsp;</TD>
<TD style="BORDER-BOTTOM: 1px solid; " vAlign=bottom align=right width="11%" bgcolor="#CBDBD1" height="20">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">77,461 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1" height="20">&nbsp;</TD>
<TD style="BORDER-BOTTOM: 1px solid; " vAlign=bottom align=left width="1%" bgcolor="#CBDBD1" height="20">&nbsp;</TD>
<TD style="BORDER-BOTTOM: 1px solid; " vAlign=bottom align=right width="11%" bgcolor="#CBDBD1" height="20">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">148,306 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1" height="20">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="71%" height="24">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%" height="24">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium double black; ; border-top-style:solid; border-top-width:1" vAlign=bottom align=left width="1%" height="24">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium double black; ; border-top-style:solid; border-top-width:1" vAlign=bottom align=right width="11%" height="24">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5,752,549 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="2%" height="24">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium double black; ; border-top-style:solid; border-top-width:1" vAlign=bottom align=left width="1%" height="24">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium double black; ; border-top-style:solid; border-top-width:1" vAlign=bottom align=right width="11%" height="24">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,315,426 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left width="1%" height="24">&nbsp;</TD></TR></TABLE></DIV>
<DIV>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>14. SUBSEQUENT EVENTS</STRONG></FONT></DIV>
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<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>
  On December 13,
  2004, the Company received a firm order from ADS, Inc. for $4.5 million in
  LRAD products for use by the U.S. Army 3rd Infantry Division, Fort Stewart,
  Georgia.&nbsp; The order also includes $0.4 million in ancillary products
  which the Company is providing on a value-added reseller basis along with the LRAD units.&nbsp; The
  order calls for deliveries in December 2004 and January 2005 and customary
  payment terms.</font><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2"><p>&nbsp;</DIV>
<DIV><BR></DIV>
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<TD align=middle width="34%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">F-29</FONT></TD>
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<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>Notes to the Financial Statements</STRONG></FONT></DIV>
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  <FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In December 2004, the Company entered into a Committed Equity Financing Facility (CEFF) with Kingsbridge Capital Ltd., pursuant to which Kingsbridge committed to purchase</FONT></font><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2"><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
subject to certain significant limiting conditions,</FONT></font></font><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> up to $25 million of the Company&#146;s common stock to support future growth. As part of the arrangement, the Company issued a warrant to Kingsbridge to purchase 275,000 shares of its common stock at a price of $8.60 per share.
  The warrant is exercisable beginning six months after the date of grant and
  for a period of five years thereafter. Subject to certain conditions and limitations, from time to time under the CEFF, the Company may require Kingsbridge to purchase newly-issued shares of its common stock at a price that is between 88% and 92% of the volume weighted average price during a 15 day purchase period, and thereby raise capital as required, at the time, price and in the amounts deemed suitable to the Company. The CEFF
requires the Company to have a resale registration statement filed within 45 days of </FONT>



  <FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">entering the CEFF, and to have such registration statement declared effective by the Securities and Exchange Commission (SEC) within 45 days or 120 days of filing, depending  on whether the SEC elects to review the registration statement.
No draws can be made by the company until the registration statement is
effective.&nbsp; As of December 14, 2004 the Company had not filed the required resale registration statement. Based on such factors as market conditions, financing needs and the time required for the SEC to declare the resale registration statement effective, the Company currently expects that it may begin to utilize the CEFF during fiscal 2005 in order to fund working capital requirements.
  However, the timing and extent of the Company's ability to use the CEFF is
  uncertain. <br>
<br>
The Company is obligated to use 40% of the proceeds it may receive from the CEFF
to prepay any outstanding interest and principal on the notes sold in December
2004 and discussed below.</FONT><p><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Under the rules of the Nasdaq Stock Market, the maximum number of shares the Company may sell to Kingsbridge without approval of the Company's stockholders is
  3,684,728 (exclusive of the warrant), which may further limit the amount of proceeds the Company is able to obtain from the CEFF. </FONT>
  </p>
  <p><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The Company agreed to pay to a consultant a finder fee equal to 4% of the first $5 million raised under the CEFF, 3% for the second $5 million raised under the CEFF, 2% for the third $5 million raised under the CEFF, and 1.5% for any additional amounts raised.<br>
  <br>
  In December 2004, the Company
sold for cash in a private offering an aggregate of $2,000,000 of unsecured
subordinated promissory notes due December 31, 2006.&nbsp; Interest on these notes
accrues at the rate of 8% per year and is due and payable quarterly in arrears.&nbsp;
The Company is required to use 40% of the net proceeds of any future equity
financing to prepay these notes, including any amounts the Company raises
pursuant to the CEFF described above.&nbsp; The Company may also prepay these notes
in its discretion at any time without penalty after June 30, 2005. </p>
<p class="Normal">In connection with the issuance
of these notes, each purchaser was granted a warrant to purchase 7,500 shares of
the Company's common stock until December 31, 2009 for each $100,000 of notes
purchased (prorated for amounts less than $100,000) such that the Company issued
in the aggregate warrants exercisable for an aggregate of 150,000 shares of its
common stock.&nbsp; The exercise price of the warrants was $9.28 per share for
purchasers who were directors, officers, employees or consultants of the
Company, or affiliates of such persons, and $8.60 per share for other
purchasers.&nbsp; Warrants exercisable for 75,000 shares were issued at each such
exercise price.&nbsp; The holders of these warrants are entitled to be included on
any registration statement the Company files after the registration statement
for the CEFF described above, subject to customary exceptions and cut-back
rights.</p>
<p class="Normal">A trust affiliated with an
officer, director and significant stockholder of the Company purchased a note in
the principal amount of $500,000 and received a warrant exercisable for 37,500
shares with an exercise price of $9.28 per share. </p>
</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In October 2004, the Company granted an extension of time to exercise options to purchase 75,550 shares of common stock held by certain terminated employees. As a result, the Company will recognize an expense of $215,300 in the first quarter of fiscal 2005 for these options.
  <br>
  <br>
  On December 22, 2004, the Company granted inducement stock options to certain
  of our new employees.&nbsp; These options were granted without stockholder
  approval to 6 new non-executive employees as an inducement material to the
  individuals' entering into employment with our company, and the issuances were
  approved by our Compensation Committee pursuant to NASDAQ Marketplace Rule
  4350(i)(1)(A)(iv).&nbsp; The options are exercisable for an aggregate of
  76,500 shares of common stock with an exercise price of $10.06 per share.&nbsp;
  Each option has a five year term and vests 25% on the first anniversary of the
  grant date and then quarterly thereafter for the next 12 quarters, subject to
  continued employment and other conditions.&nbsp;
<p class="Normal">On November 16, 2004, the Company
granted to Carl Gruenler, the Vice President of Government and Force Protection
Systems Group, a five-year stock option under the 2002 Stock Option Plan, to
purchase 75,000 shares of common stock at an exercise price of $6.70 per share.&nbsp;
The option vests over four years, with 25% of the shares vesting on the first
anniversary of the date of grant, and the balance vesting in equal quarterly
installments thereafter.&nbsp;  </FONT></DIV>

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F-30</FONT></TD>
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<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>Notes to the Financial Statements</STRONG></FONT></DIV>
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<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="71%" colspan="4">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>15. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="11%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="11%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>Years Ended September 30,</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="12%" colSpan=2>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>2004 </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="12%" colSpan=2>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>2003 </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="11%" colSpan=2>
<DIV align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><STRONG>2002 </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Supplemental Information:</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="12%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="12%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="11%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Cash paid for interest</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2,889 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">111,886 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">12,265 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Cash paid for taxes</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">14,537 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2,467 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">800 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Non-cash financing activities:</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Senior notes applied to warrant exercise</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">681,845 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">-</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Senior notes applied to purchase of Series E stock</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,000,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">-</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Issuance of stock warrants in connection with convertible debt</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">624,750 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Purchase of computer equipment with capital lease</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">50,041 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">12% subordinated notes and interest</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">converted to common stock</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2,435,032 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Sale of equipment for accounts payable</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">117,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Common stock issued on conversion of Series B stock</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">2,101,413 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Common stock issued on conversion of Series C stock</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">236,498 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Common stock issued on conversion of Series D stock</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">1,935,559 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Common stock issued on conversion of Series E stock</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">320,414 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">823,208 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#cbdbd1>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
<DIV style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Common stock issued for settlement of legal accrual</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">248,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
<DIV><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR bgColor=#ffffff>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">&nbsp;</TD></TR></TABLE></DIV>
<DIV valign="top"></DIV></DIV>



</font>
<Font style='font-size:10.0pt;font-family:Symbol;layout-grid-mode:line; color:windowtext'>

<p><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2"></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>16. SUMMARIZED QUARTERLY RESULTS (unaudited)</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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></DIV>
<DIV><BR></DIV>
<DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%">
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>First </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Second </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Third </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Fourth </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Quarter </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Quarter </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Quarter </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Quarter </STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Fiscal 2004</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Revenues</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">774,778 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,493,250 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,107,281 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,377,240 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Gross profit (loss) (1)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">366,300 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">548,026 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,100,962 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">267,440 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Net loss</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1,136,427</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1,165,196</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1,390,411</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(2,268,402</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Loss per Share (2)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(0.07</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(0.08</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(0.09</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(0.11</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<tr>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="12%" colSpan=2>
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="12%" colSpan=2>
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="12%" colSpan=2>
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="11%" colSpan=2>
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
</tr>
<tr>
  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>First </STRONG></FONT></DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Second </STRONG></FONT></DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Third </STRONG></FONT></DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Fourth </STRONG></FONT></DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>

</font>



</tr>
<tr>
  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Quarter </STRONG></FONT></DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Quarter </STRONG></FONT></DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Quarter </STRONG></FONT></DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Quarter </STRONG></FONT></DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>

</font>



</tr>
<tr>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="12%" colSpan=2>
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="12%" colSpan=2>
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="12%" colSpan=2>
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle width="11%" colSpan=2>
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
</tr>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Fiscal 2003</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Revenues</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">423,299 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">237,942 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">313,612 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">340,573 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Gross profit (loss) (1)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">101,664 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(112,842</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">127,511 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(344,984</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Net loss</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1,731,645</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1,854,306</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(2,382,652</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(2,258,410</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Loss per Share (2)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(0.13</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(0.18</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(0.19</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(0.12</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV>
<TABLE id=list cellSpacing=0 cellPadding=0 width="100%">
<TR style="LINE-HEIGHT: 1.25" vAlign=top>
<TD style="WIDTH: 18pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1)&nbsp;&nbsp;</FONT></TD>
<TD><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Gross profit is calculated by subtracting cost of revenues from total revenues. </FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=list cellSpacing=0 cellPadding=0 width="100%">
<TR style="LINE-HEIGHT: 1.25" vAlign=top>
<TD style="WIDTH: 18pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(2)&nbsp;&nbsp;</FONT></TD>
<TD><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Loss per share is computed independently for each quarter and the full year based upon respective average shares outstanding. Therefore, the sum of the quarterly net loss per share amounts may not equal the annual amounts reported.</FONT></TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV>
<TABLE id=PGBRK cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD vAlign=bottom width="100%" colSpan=3>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 18pt" align=right><FONT id=TAB2 style="COLOR: black; LETTER-SPACING: 207pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;</DIV></TD></TR>
<TR>
<TD align=left width="33%"><FONT size=1>&nbsp;</FONT></TD>
<TD align=middle width="34%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">
F-31</FONT></TD>
<TD align=right width="33%"><FONT size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD style="PAGE-BREAK-AFTER: always" width="100%" colSpan=3><FONT size=1>
<HR style="PAGE-BREAK-AFTER: always" color=black noShade SIZE=1>
</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=HDR cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD vAlign=bottom width="100%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG>American Technology Corporation<br>
  Schedule II - Valuation and Qualifying Accounts</STRONG></FONT></DIV>

</font>



<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' face="Times New Roman" size="2">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>
<HR align=center width="100%" color=#000000 noShade SIZE=2>
</DIV></TD></TR></TABLE></DIV>
<DIV><BR><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%" style="border-left-width: 0">
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="57%" colSpan=4>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>ALLOWANCE FOR DOUBTFUL ACCOUNTS</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>
  <p align="center"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Balance at</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>
  <p align="center"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Charged to</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>
  <p align="center"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Balance</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>
  <p align="center"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Beginning</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>
  <p align="center"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Cost and </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>
  <p align="center"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">At end of</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Description</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>
  <p align="center"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Of period</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>
  <p align="center"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Expenses</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>
  <p align="center"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Deductions</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>
  <p align="center"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Period</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Year ended September 30, 2004</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">25,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">25,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Year ended September 30, 2003</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">20,191 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4,809 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">25,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Year ended September 30, 2002</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">20,191 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">20,191 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>RESERVE FOR OBSOLESCENCE</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<tr>
  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>&nbsp;</DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>
  <p align="center"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Balance at</FONT></DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>
  <p align="center"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Charged to</FONT></DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>&nbsp;</DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>
  <p align="center"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Balance</FONT></DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>

</font>



</tr>
<tr>
  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>&nbsp;</DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>
  <p align="center"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Beginning</FONT></DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>
  <p align="center"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Cost and </FONT></DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>&nbsp;</DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>
  <p align="center"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">At end of</FONT></DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>

</font>



</tr>
<tr>
  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Description</FONT></DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>
  <p align="center"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Of period</FONT></DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>
  <p align="center"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Expenses</FONT></DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>
  <p align="center"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Deductions</FONT></DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>
  <p align="center"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Period</FONT></DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>

</font>



</tr>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#FFFFFF">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#FFFFFF">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#FFFFFF">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#FFFFFF">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#FFFFFF">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#FFFFFF">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#FFFFFF">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#FFFFFF">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#FFFFFF">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#FFFFFF">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#FFFFFF">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#FFFFFF">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#FFFFFF">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#FFFFFF">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Year ended September 30, 2004</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">20,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">90,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">110,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Year ended September 30, 2003</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">20,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">20,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Year ended September 30, 2002</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">20,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">20,000 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>WARRANTY RESERVE</STRONG></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<tr>
  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>&nbsp;</DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>
  <p align="center"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Balance at</FONT></DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>
  <p align="center"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Charged to</FONT></DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>&nbsp;</DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>
  <p align="center"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Balance</FONT></DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>

</font>



</tr>
<tr>
  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>&nbsp;</DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>
  <p align="center"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Beginning</FONT></DIV></TD>

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  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>
  <p align="center"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Cost and </FONT></DIV></TD>

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  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>&nbsp;</DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>
  <p align="center"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">At end of</FONT></DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>

</font>



</tr>
<tr>
  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Description</FONT></DIV></TD>

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<TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>
  <p align="center"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Of period</FONT></DIV></TD>

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<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>
  <p align="center"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Expenses</FONT></DIV></TD>

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<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="12%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>
  <p align="center"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Deductions</FONT></DIV></TD>

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<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="2%">&nbsp;</TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right width="11%" colSpan=2>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right>
  <p align="center"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Period</FONT></DIV></TD>

</font>



  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; layout-grid-mode:line' face="Times New Roman" size="2">
<TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left width="1%">&nbsp;</TD>

</font>



</tr>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#FFFFFF">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#FFFFFF">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#FFFFFF">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#FFFFFF">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#FFFFFF">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#FFFFFF">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#FFFFFF">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#FFFFFF">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#FFFFFF">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#FFFFFF">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#FFFFFF">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#FFFFFF">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#FFFFFF">
&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#FFFFFF">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Year ended September 30, 2004</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">319,500 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">101,671 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">89,254 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">331,917 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Year ended September 30, 2003</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6,313 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">313,187 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">319,500 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
<TR>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="43%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Year ended September 30, 2002</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6,313 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">- </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="2%" bgcolor="#CBDBD1">&nbsp;</TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="11%" bgcolor="#CBDBD1">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6,313 </FONT></DIV></TD>
<TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="1%" bgcolor="#CBDBD1">&nbsp;</TD></TR></TABLE></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><BR></DIV>
<DIV valign="top"></DIV>
<DIV><BR></DIV>
<DIV>
<TABLE id=PGBRK cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD vAlign=bottom width="100%" colSpan=3>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 18pt" align=right><FONT id=TAB2 style="COLOR: black; LETTER-SPACING: 207pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;</DIV></TD></TR>
<TR>
<TD align=left width="33%"><FONT size=1>&nbsp;</FONT></TD>
<TD align=middle width="34%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">F-32</FONT></TD>
<TD align=right width="33%"><FONT size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD style="PAGE-BREAK-AFTER: always" width="100%" colSpan=3><FONT size=1>
<HR style="PAGE-BREAK-AFTER: always" color=black noShade SIZE=1>
</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=HDR cellSpacing=0 cellPadding=0 width="100%" align=center border=0>
<TR>
<TD vAlign=bottom width="100%">
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><STRONG></STRONG></FONT>&nbsp;</DIV></TD></TR></TABLE></DIV>

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<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in;font-size:10.0pt;font-family:"Times New Roman"'><b ><Font style='font-size:10.0pt;font-family: "Times New Roman"'>&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;&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;AMERICAN TECHNOLOGY CORPORATION</Font></b></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&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;&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;December
28, 2004</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&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;&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;By: <u>/s/ ELWOOD G. NORRIS</u>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&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;&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Elwood
G. Norris</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&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;&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chairman
of the Board</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
&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;&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;&nbsp;</Font></p>

<p align=center style='margin:0in;font-size:12.0pt;font-family:Times;color:black;margin-left:.5in;text-align:center; text-indent:-.5in'><b><Font style='font-size:10.0pt;font-family:"Times New Roman"'>POWER OF ATTORNEY</Font></b></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;margin-left:.5in;text-indent:-.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:229.5pt'><Font style='font-size:10.0pt;
font-family:"Times New Roman"'>Know all persons by these presents, that each
person whose signature appears below constitutes and appoints Elwood G. Norris
and Michael A. Russell, 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:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Date:&nbsp; December
28,
2004&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;&nbsp;&nbsp;&nbsp;&nbsp; By
<u>/s/ ELWOOD G. NORRIS&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u>&nbsp;&nbsp;&nbsp; </Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&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;&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Elwood
G. Norris</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&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;&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chairman
of the Board and Director</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&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;&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Co-Principal
Executive Officer)</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Date:&nbsp; December
28,
2004&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;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;By
<u>/s/ KALANI JONES&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u></Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&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;&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Kalani
Jones</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&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;&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;President,
Chief Operating Officer and Director</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&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;&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Co-Principal
Executive Officer)</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

<Font style='font-family:"Times New Roman"' size="2">


  <Font style='font-family:Times New Roman; color:windowtext; font-size:10.0pt' size="2">

<Font style='font-size:10.0pt; color:windowtext; font-family:Times New Roman' face="Times New Roman">

 <Font style='font-size:10.0pt;font-family:Symbol'>

 <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' size="2" face="Times New Roman">

  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>

<Font style='font-size:10.0pt;font-family:Symbol; color:windowtext' face="Times New Roman" size="2">

<Font style='font-size:10.0pt;font-family:Symbol;layout-grid-mode:line; color:windowtext' face="Times New Roman">
  <Font style='font-size:10.0pt;font-family:"Times New Roman"'>

<Font style='font-size:10.0pt; font-family:Symbol' size="2">

<Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'>

<Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'><Font style='font-size:10.0pt;font-family:"Times New Roman";font-weight:normal'>



<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Date:&nbsp; December
28,
2004&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;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;By
<u>/s/ MICHAEL A. RUSSELL&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u></Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
&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;&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</Font><Font style='font-family:"Times New Roman"' size="2"><Font style='font-family:Times New Roman; color:windowtext; font-size:10.0pt' size="2"><Font style='font-size:10.0pt; color:windowtext; font-family:Times New Roman' face="Times New Roman"><Font style='font-size:10.0pt;font-family:Symbol'><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' size="2" face="Times New Roman"><Font style='font-size:10.0pt; font-family:Symbo
l; color:windowtext'><Font style='font-size:10.0pt;font-family:Symbol; color:windowtext' face="Times New Roman" size="2"><Font style='font-size:10.0pt;font-family:Symbol;layout-grid-mode:line; color:windowtext' face="Times New Roman"><Font style='font-size:10.0pt;font-family:"Times New Roman"'><Font style='font-size:10.0pt; font-family:Symbol' size="2"><Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'><Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'><Font style='font-size:10.0pt;font-family:"Times New Roman"; font-weight:normal'>Michael A. Russell,
Chief Financial Officer</Font></font></font></font></font></font></font></font></font></font></font></font></font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
&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;&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</Font><Font style='font-family:"Times New Roman"' size="2"><Font style='font-family:Times New Roman; color:windowtext; font-size:10.0pt' size="2"><Font style='font-size:10.0pt; color:windowtext; font-family:Times New Roman' face="Times New Roman"><Font style='font-size:10.0pt;font-family:Symbol'><Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' size="2" face="Times New Roman"><Font style='font-size:10.0pt; font-family:Symbo
l; color:windowtext'><Font style='font-size:10.0pt;font-family:Symbol; color:windowtext' face="Times New Roman" size="2"><Font style='font-size:10.0pt;font-family:Symbol;layout-grid-mode:line; color:windowtext' face="Times New Roman"><Font style='font-size:10.0pt;font-family:"Times New Roman"'><Font style='font-size:10.0pt; font-family:Symbol' size="2"><Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'><Font style='font-size: 10.0pt;font-family:"Times New Roman";font-weight:normal; layout-grid-mode:line; color:windowtext'><Font style='font-size:10.0pt;font-family:"Times New Roman"; font-weight:normal'>(Principal
Financial and Accounting Officer)</Font></font></font></font></font></font></font></font></font></font></font></font></font></p>

</font></font>

</font>
</font></font></font></font></font></font></font></font></font></font>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
Date:&nbsp; December 28,
2004&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; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By
<u>/s/ RICHARD M. WAGNER&nbsp;&nbsp;&nbsp;&nbsp;</u></Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&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;&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Richard
M. Wagner</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&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;&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Director</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Date:&nbsp; December
28,
2004&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By
<u>/s/ DAVID J. CARTER&nbsp;&nbsp;&nbsp;&nbsp;</u></Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&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;&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;David
J. Carter</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;tab-stops:.5in 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&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;&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Director</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>&nbsp;</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;
font-family:"Times New Roman"'>Date:&nbsp; December 28, 2004&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; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By<u>
/s/ DANIEL HUNTER&nbsp;&nbsp;&nbsp;</u></Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;
font-family:"Times New Roman"'>&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;&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Daniel
Hunter</Font></p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;
font-family:"Times New Roman"'>&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;&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Director</Font></p>



<Font style='font-size:10.0pt;font-family:"Times New Roman"; color:windowtext' face="Times New Roman" size="2">
<p align="center"><font size="2" face="Times New Roman">
- - 44 -</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
</font>

</font></font>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:none;mso-outline-level:
9;tab-stops:9.0pt 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:none;mso-outline-level:
9;tab-stops:9.0pt 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in' align="center"><b
><Font style='font-family:"Times New Roman"'><a name="Exhibit Index">Exhibit
Index</a></Font></b></p>

</font></font>
<p><Font style='font-size:10.0pt' face="Times New Roman">&nbsp;</Font></p>

<table border=0 cellspacing=0 cellpadding=0 style='border-collapse:collapse;
 mso-padding-alt:0in 5.4pt 0in 5.4pt'>
 <tr>
  <td width=638 colspan=4 valign=top style='width:6.65in;'>
  <p align=left style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>
  <Font style='font-size:10.0pt;font-family:
  "Times New Roman"; font-weight:700'>3.&nbsp;&nbsp;Articles of
  Incorporation and Bylaws</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'><font face="Times New Roman" size="2">&nbsp;</font></p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>
  <font face="Times New Roman" size="2">&nbsp;</font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-family:Palatino;color:black;tab-stops:.5in'>
  <font face="Times New Roman" size="2">&nbsp;</font></p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-family:Palatino;color:black;tab-stops:.5in'>
  <font face="Times New Roman" size="2">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>3.1</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>3.1.1
  </Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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 the quarter ended March&nbsp;31, 1997, dated May 13, 1997.</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>3.1.2
  </Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:justify;
  text-justify:inter-ideograph;text-indent:0in;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:
  right;text-indent:0in;tab-stops:.5in'>3.1.3</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:
  .5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p style='margin:0pt;margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:   .5in'>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 for the year ended September 30, 1998, dated December 29, 1998.</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph;
  '>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right;'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:justify;   text-justify:inter-ideograph;text-indent:0in;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:
  right;text-indent:0in;tab-stops:.5in'>3.1.4</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:
  .5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p style='margin:0pt;margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:
  .5in'>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.</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph;
  '>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right;'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:justify;
  text-justify:inter-ideograph;text-indent:0in;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:
  right;text-indent:0in;tab-stops:.5in'>3.1.5</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:   .5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p style='margin:0pt;margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:
  .5in'>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, dated May 15, 2002.</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph;
  '>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right;'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:justify;
  text-justify:inter-ideograph;text-indent:0in;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:
  right;text-indent:0in;tab-stops:.5in'>3.1.6</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:
  .5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p style='margin:0pt;margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:
  .5in'>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, dated December 23, 2002.</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph;
  '>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right;'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:justify;
  text-justify:inter-ideograph;text-indent:0in;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:   right;text-indent:0in;tab-stops:.5in'>3.1.7</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:
  .5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p style='margin:0pt;margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:
  .5in'>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.</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph;
  '>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right;'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph;
  '>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>3.2</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;
  font-family:"Times New Roman"'>Amended and Restated Bylaws of American
  Technology Corporation. Filed as Exhibit 3.1  on Form 10-Q for the quarter ended
  March 31, 2004, dated May 5, 2004.</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=638 colspan=4 valign=top style='width:6.65in;'>
  <p align=left style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>
  <Font style='font-size:10.0pt;font-family:
  "Times New Roman"; font-weight:700'>10.&nbsp;&nbsp;Material
  Contracts</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.1</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Royalty Agreement
  between ATC and Elwood G. Norris dated September 3, 1985.&nbsp;&nbsp;Filed as Exhibit 6.2 on Form 10-SB
  effective August 1, 1994.+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.2</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.2.1</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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 year ended
  September 30, 1996, dated December 13, 1996.+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.3</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Amended and Restated
  Sublease Agreement between ATC and Smiths Industries Aerospace &amp; Defense
  Systems, Inc. as amended, dated September 1, 2000.&nbsp;&nbsp;Filed as Exhibit 10.6.1 on Form 10-K for the year ended
  September 30, 2000, dated October 29, 2000.</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.3.1</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>First Amendment to
  Amended and Restated Sublease Agreement, dated January 1, 2004.&nbsp;&nbsp;Filed as Exhibit 10.1 on Form 10-Q for the
  quarter ended March 31, 2004, dated May 5, 2004.</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;' align="left">
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 </table>

<Font style='font-size:10.0pt; color:windowtext' size="2"><p align="center">
- - 45 -</p>
</font>

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext'>

 <Font style='font-size:10.0pt; font-family:Symbol' size="2">

<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  <font face="Times New Roman" size="2">&nbsp; </font>
</div>

<p style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>

<table border=0 cellspacing=0 cellpadding=0 style='border-collapse:collapse;
 mso-padding-alt:0in 5.4pt 0in 5.4pt'>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.4</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Employment Agreement
  dated as of September 1, 1997 between ATC and Elwood G. Norris filed as
  Exhibit 10.16 on Form 10-KSB for year ended September 30, 1997, dated
  December 1, 1997.+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  10.5</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.5.1</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Form of Incentive
  Stock Option Agreement under 1997 Stock Option Plan.*+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.5.2</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Form of Non-Statutory
  Stock Option Agreement under 1997 Stock Option Plan.*+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.6</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>2002
  Stock Option Plan.&nbsp;&nbsp;Filed as Exhibit
  99.1 on Form S-8 dated November 18, 2002.+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:justify;
  text-justify:inter-ideograph;text-indent:0in;tab-stops:
  .5in; margin-right:0pt; margin-bottom:0pt'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:   right;text-indent:0in;tab-stops:.5in'>10.6.1</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:.5in; margin-right:0pt; margin-bottom:0pt'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:.5in; margin-right:0pt; margin-bottom:0pt'>Form of Stock Option Grant Notice and Stock Option
  Agreement under 2002 Stock Option Plan.*+</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.7 </Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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).&nbsp;&nbsp;Filed as Exhibit 4.12 on Form 8-K dated
  October 12, 2001.</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  10.8</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Series
  D Stock and Warrant Purchase Agreement dated May 3, 2002.&nbsp;&nbsp;Filed as Exhibit 10.1
  on Form 10-Q for the
  quarter ended March 31, 2002, dated May 15, 2002.</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.8.1</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Amendment
  No. 1 to Series D Preferred Stock and Warrant Purchase Agreement dated July
  3, 2002.&nbsp;&nbsp;Filed as Exhibit 10.3  on
  Form 10-Q for the quarter ended June 30, 2002, dated August 14, 2002.</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.9</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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  on Form 10-Q for the quarter ended March 31, 2002, dated May 15, 2002.</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:justify;
  text-justify:inter-ideograph;text-indent:0in;tab-stops:
  .5in; margin-right:0pt; margin-bottom:0pt'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:   right;text-indent:0in;tab-stops:.5in'>10.10</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:.5in; margin-right:0pt; margin-bottom:0pt'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:.5in; margin-right:0pt; margin-bottom:0pt'>Form of 8% Senior Secured Promissory Note due December
  31, 2003 aggregating $1,500,000 granted to accredited investors (individual
  notes differed as to holder and amount). Filed as Exhibit 4.1 on Form 8-K
  dated October 7, 2002.</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:justify;
  text-justify:inter-ideograph;text-indent:0in;tab-stops:
  .5in; margin-right:0pt; margin-bottom:0pt'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:
  right;text-indent:0in;tab-stops:.5in'>10.10.1</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:.5in; margin-right:0pt; margin-bottom:0pt'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:.5in; margin-right:0pt; margin-bottom:0pt'>Form of Amendment to 8% Senior Secured Promissory   Note. Filed as Exhibit 4.6  on Form 8-K dated March 6, 2003.</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:justify;   text-justify:inter-ideograph;text-indent:0in;tab-stops:   .5in; margin-right:0pt; margin-bottom:0pt'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:
  right;text-indent:0in;tab-stops:.5in'>10.11</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:.5in; margin-right:0pt; margin-bottom:0pt'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:.5in; margin-right:0pt; margin-bottom:0pt'>Form of Security Agreement. Filed as Exhibit 4.2 on
  Form 8-K dated October 7, 2002.</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.12</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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  on Form 10-K for
  the year ended September 30, 2002, dated December 23, 2002.</Font></p>
  </td>
 </tr>
 </table>

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- - 46 -</font></p>
<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
</font>

</font>

<p style='margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:none;mso-outline-level:
9;tab-stops:9.0pt 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in 6.5in'>&nbsp;</p>

</font></font>
</font></font></font></font></font></font></font></font></font></font>

<table border=0 cellspacing=0 cellpadding=0 style='border-collapse:collapse;
 mso-padding-alt:0in 5.4pt 0in 5.4pt'>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.13</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Series
  E Preferred Stock and Warrant Purchase Agreement dated February 28, 2003.
  Filed as Exhibit 4.1  on Form 8-K filed on March 6, 2003.</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.14 </Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>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).&nbsp;&nbsp;Filed as Exhibit 4.3 on Form 8-K dated
  March 6, 2003.</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
</table>

<table border=0 cellspacing=0 cellpadding=0 style='border-collapse:collapse;
 mso-padding-alt:0in 5.4pt 0in 5.4pt'>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.15</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Employment
  letter of James M. Irish dated January 27, 2003. Filed as Exhibit 10.5  on
  Form 10-Q for the quarter ended March 31, 2003, dated May 15, 2003.+<br>
&nbsp;</Font></p>
  </td>
 </tr>
</table>

</font></font>

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' size="2">

<table border=0 cellspacing=0 cellpadding=0 style='border-collapse:collapse;
 mso-padding-alt:0in 5.4pt 0in 5.4pt'>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.16</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Securities
  Purchase Agreement dated July 11, 2003. Filed as Exhibit 4.1  on Form 8-K
  dated July 17, 2003. </Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.17</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Registration
  Rights Agreement dated July 11, 2003. Filed as Exhibit 4.2  on Form 8-K dated
  July 17, 2003. </Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:justify;
  text-justify:inter-ideograph;text-indent:0in;tab-stops:
  .5in; margin-right:0pt; margin-bottom:0pt'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:   right;text-indent:0in;tab-stops:.5in'>
  10.18</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:.5in; margin-right:0pt; margin-bottom:0pt'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:.5in; margin-right:0pt; margin-bottom:0pt'>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  on Form 8-K dated July 17, 2003. </p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:justify;
  text-justify:inter-ideograph;text-indent:0in;tab-stops:
  .5in; margin-right:0pt; margin-bottom:0pt'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:
  right;text-indent:0in;tab-stops:.5in'>10.19</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:.5in; margin-right:0pt; margin-bottom:0pt'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:.5in; margin-right:0pt; margin-bottom:0pt'>License and Remarketer Agreement between ATC and   General Dynamics Armament and Technical Products, Inc. dated February 14,   2003. Filed as Exhibit 10.27  on Form 10-K for the year ended September 30,   2003, dated December 29, 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. </p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:justify;   text-justify:inter-ideograph;text-indent:0in;tab-stops:   .5in; margin-right:0pt; margin-bottom:0pt'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-align:
  right;text-indent:0in;tab-stops:.5in'>10.20</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:.5in; margin-right:0pt; margin-bottom:0pt'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin-top:0in;margin-left:1.0in;text-indent:-1.0in;font-size:10.0pt;font-family:"Times New Roman";color:black;;margin-left:0in;text-indent:0in;tab-stops:.5in; margin-right:0pt; margin-bottom:0pt'>License and Remarketer Agreement between ATC and Bath
  Iron Works Corporation dated February 13, 2003. Filed as Exhibit 10.28.1  on
  Form 10-K for the year ended September 30, 2003, dated December 29, 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.</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  10.21</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Assignment
  of License and Remarketer Agreement from Bath Iron Works Corporation to
  General Dynamics Armament and Technical Products, Inc., dated September 23,
  2003. Filed as Exhibit 10.28.2  on Form 10-K for the year ended September 30,
  2003, dated December 29, 2003.</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  10.22</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Employment
  Agreement of Kalani Jones dated August 28, 2003, as amended. Filed as Exhibit
  10.29  on Form 10-K for the year ended September 30, 2003, dated December 29,
  2003.+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  10.23</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Employment
  Agreement of Carl Gruenler, as amended. Filed as Exhibit 10.30  on Form 10-K
  for the year ended September 30, 2003, dated December 29, 2003.+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  10.24</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Form
  of Inducement Grant Notice and Inducement Stock Option Agreement. Filed as
  Exhibit 4.1  on Form 8-K dated September 28, 2004.+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  10.25</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Table
  of Inducement Grants.*+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  10.26</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Form
  of Special Stock Option.&nbsp;&nbsp;Filed as
  Exhibit 99.2  on Form S-8 dated November 18, 2002.+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  10.27</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Employment
  Agreement of Michael Russell. Filed as Exhibit 10.1  on Form 10-Q for the
  quarter ended June 30, 2004, dated August 4, 2004.+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  10.28</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Inducement
  Grant Notice and Inducement Stock Option Agreement of Michael Russell.*+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  10.29</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Employment
  Agreement of Joseph A. Zerucha.&nbsp;&nbsp;Filed
  as Exhibit 10.2 on Form 10-Q for the quarter ended December 31, 2003, dated
  February 12, 2004.+</Font></p>
  </td>
 </tr>
</table>

</font>

<Font style='font-size:10.0pt; color:windowtext' size="2">

<p align="center">-47-</p>
</font>

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' size="2">

<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  <font face="Times New Roman" size="2">&nbsp; </font>
</div>

<table border=0 cellspacing=0 cellpadding=0 style='border-collapse:collapse;
 mso-padding-alt:0in 5.4pt 0in 5.4pt'>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:left;'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>10.30</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Separation
  Agreement of Joseph A. Zerucha.&nbsp;&nbsp;Filed
  as Exhibit 10.2 on Form 10-Q for the Form 10-Q for the quarter ended June 30,
  2004, dated August 4, 2004.+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  10.31</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Employment
  Agreement of Bruce Ehlers.&nbsp;&nbsp;Filed as
  Exhibit 10.1 on Form 10-Q for the quarter ended December 31, 2003, dated
  February 12, 2004.+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  10.32</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
</font>

<Font style='font-size:10.0pt; color:windowtext' size="2" face="Times New Roman">

  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>
  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' size="2"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Release Agreement of Bruce Ehlers.*+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  10.33</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Special
  Stock Option with Elwood Norris dated November 13, 2000.*+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  10.34</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Special
  Stock Option with David Carter dated November 13, 2000.*+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  10.35</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>Special
  Stock Option with Richard Wagner dated November 13, 2000.*+</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  10.36</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Common Stock Purchase Agreement dated December 14, 2004 with Kingsbridge
  Capital Limited. Filed as Exhibit 10.1 on Form 8-K filed December 17, 2004.</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  10.37</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Registration Rights Agreement dated December 14, 2004 with Kingsbridge Capital
  Limited. Filed as Exhibit 10.2 on Form 8-K filed December 17, 2004.</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  10.38</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Warrant dated December 14, 2004 in favor of Kingsbridge Capital Limited. Filed
  as Exhibit 4.1 to Form 8-K filed December 17, 2004.</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  &nbsp;</td>
  <td width=56 valign=top style='width:41.8pt;'>
  &nbsp;</td>
  <td width=30 valign=top style='width:22.5pt;'>
  &nbsp;</td>
  <td width=535 valign=top style='width:401.4pt;'>
  &nbsp;</td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  &nbsp;</td>
  <td width=56 valign=top style='width:41.8pt;'>

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' size="2">

  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  10.39</Font></p>
</font>

  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  &nbsp;</td>
  <td width=535 valign=top style='width:401.4pt;'>

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' size="2">

  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Promissory Note and Warrant Purchase Agreement dated December 23, 2004 with
  the purchasers described therein.*+</Font></p>
</font>

  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  &nbsp;</td>
  <td width=56 valign=top style='width:41.8pt;'>
  &nbsp;</td>
  <td width=30 valign=top style='width:22.5pt;'>
  &nbsp;</td>
  <td width=535 valign=top style='width:401.4pt;'>
  &nbsp;</td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  &nbsp;</td>
  <td width=56 valign=top style='width:41.8pt;'>

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' size="2">

  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  10.40</Font></p>
</font>

  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  &nbsp;</td>
</font>

<Font style='font-size:10.0pt; color:windowtext' size="2" face="Times New Roman">

  <td width=535 valign=top style='width:401.4pt;'>

  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>
  <font size="2"></font><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Form of Unsecured Subordinated Promissory Note.*+</Font></p>

  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  &nbsp;</td>
  <td width=56 valign=top style='width:41.8pt;'>
  &nbsp;</td>
  <td width=30 valign=top style='width:22.5pt;'>
  &nbsp;</td>
  <td width=535 valign=top style='width:401.4pt;'>
  &nbsp;</td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  &nbsp;</td>
  <td width=56 valign=top style='width:41.8pt;'>

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' size="2">

  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  10.41</Font></p>
</font>

  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  &nbsp;</td>
</font>

<Font style='font-size:10.0pt; color:windowtext' size="2" face="Times New Roman">

  <td width=535 valign=top style='width:401.4pt;'>

  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>
  <Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' size="2"><Font style='font-size:10.0pt;font-family:"Times New Roman"'>
  Form of Warrant*+</Font></p>
</font>

  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=638 colspan=4 valign=top style='width:6.65in;'>
  <p align=left style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>
  <Font style='font-size:10.0pt;font-family:
  "Times New Roman"; font-weight:700'>23.&nbsp;&nbsp;Consents of
  Experts and Counsel</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'><font face="Times New Roman" size="2">&nbsp;</font></p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>
  <font face="Times New Roman" size="2">&nbsp;</font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-family:Palatino;color:black;tab-stops:.5in'>
  <font face="Times New Roman" size="2">&nbsp;</font></p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0in;font-family:Palatino;color:black;tab-stops:.5in'>
  <font face="Times New Roman" size="2">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>23.1</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:left;tab-stops:.5in'><Font style='font-size:10.0pt;font-family:
  "Times New Roman"'>Consent of BDO Seidman, LLP.*</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=638 colspan=4 valign=top style='width:6.65in;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
  page-break-after:avoid'>
  <Font style='font-size:10.0pt;font-family:"Times New Roman"; font-weight:700'>Certifications</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph;
  mso-pagination:widow-orphan lines-together;page-break-after:avoid'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right;mso-pagination:widow-orphan lines-together;
  page-break-after:avoid'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
  page-break-after:avoid'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
  page-break-after:avoid'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph;
  mso-pagination:widow-orphan lines-together;page-break-after:avoid'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right;mso-pagination:widow-orphan lines-together;
  page-break-after:avoid'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>31.1</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
  page-break-after:avoid'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;   page-break-after:avoid;font-size:10.0pt;font-family:"Times New Roman";font-size:10.0pt'><Font style='font-size:10.0pt'>Certification of </Font>Elwood G. Norris,   Co-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.*</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph;
  mso-pagination:widow-orphan lines-together;page-break-after:avoid'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right;mso-pagination:widow-orphan lines-together;
  page-break-after:avoid'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
  page-break-after:avoid'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
  page-break-after:avoid'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph;
  mso-pagination:widow-orphan lines-together;page-break-after:avoid'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right;mso-pagination:widow-orphan lines-together;
  page-break-after:avoid'><Font style='font-size:10.0pt' face="Times New Roman">31.2</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;
  page-break-after:avoid'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;mso-pagination:widow-orphan lines-together;   page-break-after:avoid;font-size:10.0pt;font-family:"Times New Roman";font-size:10.0pt'><Font style='font-size:10.0pt'>Certification of </Font>Kalani Jones,   Co-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.*</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>31.3</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>
  <Font style='font-size:10.0pt' face="Times New Roman">Certification of Michael A.
  Russell, 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>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'><Font style='font-size:10.0pt;font-family:"Times New Roman"'>32.1</Font></p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;font-size:10.0pt;   font-family:"Times New Roman";font-size:10.0pt'><Font style='font-size:10.0pt'>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 </Font>Elwood G. Norris and Kalani Jones,   Co-Principal Executive Officers, and   Michael A. Russell, Principal Financial Officer.*</p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:justify;text-justify:inter-ideograph;
  tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;text-align:right;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Palatino;color:black;tab-stops:.5in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=638 colspan=4 valign=top style='width:6.65in;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>
  <Font style='font-size:10.0pt' face="Times New Roman">*&nbsp;&nbsp;Filed concurrently herewith</Font></p>
  </td>
 </tr>
 <tr>
  <td width=17 valign=top style='width:13.1pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:justify;text-justify:inter-ideograph'>&nbsp;</p>
  </td>
  <td width=56 valign=top style='width:41.8pt;'>
  <p align=right style='margin:0in;font-size:12.0pt;font-family:Times;color:black;text-align:right'>&nbsp;</p>
  </td>
  <td width=30 valign=top style='width:22.5pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
  <td width=535 valign=top style='width:401.4pt;'>
  <p align=right style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=638 colspan=4 valign=top style='width:6.65in;'>
  <p align=left style='margin:0pt;margin:0in;font-size:12.0pt;font-family:Times;color:black;'>
  <Font style='font-size:10.0pt' face="Times New Roman">+&nbsp;&nbsp;Management contract or compensatory plan or arrangement. </Font>

<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext' size="2" face="Times New Roman">



  <Font style='font-size:10.0pt; color:windowtext; font-family:Symbol; layout-grid-mode:line' face="Times New Roman">
  <Font style='font-size:10.0pt' face="Times New Roman">Exhibits 10.39, 10.40
  and 10.41 are included as a management contract given that a trust affiliated
  with an officer, director and significant stockholder purchased a note and
  received a warrant in connection with that financing and is a party to those
  exhibits.</Font></font></font></p>
  </td>
 </tr>
</table>

</font>

<Font style='font-size:10.0pt; color:windowtext' size="2">

  <p align="center">-48-</p>
</font>
<Font style='font-size:10.0pt; font-family:Symbol; color:windowtext; font-weight:normal; layout-grid-mode:line' size="2">

<Font style='font-size:10.0pt;font-family:"Times New Roman"; color:windowtext' face="Times New Roman" size="2">

<hr size="3" color="#000080">
<div STYLE="page-break-before: always">
  &nbsp;
</div>
</font>



</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.5.1
<SEQUENCE>2
<FILENAME>atc_10kex10-51.txt
<TEXT>
<PAGE>

                                                                 EXHIBIT 10.5.1


                         AMERICAN TECHNOLOGY CORPORATION

                             INCENTIVE STOCK OPTION

_______________________________, Optionee:

         AMERICAN TECHNOLOGY CORPORATION (the "Company"), pursuant to its 1997
Stock Option Plan (the "Plan"), has granted to you, the optionee named above, an
option to purchase shares of the common stock of the Company ("Common Stock").
This option is intended to qualify as an "incentive stock option" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").

         The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's employees
(including officers, directors and consultants). The grant of this option and
the issuance of shares upon the exercise of this option are intended to be
exempt from the securities qualification requirements of the California
Corporations Code pursuant to Section 25102(f) of that code. Defined terms not
explicitly defined in this agreement but defined in the Plan shall have the same
definitions as in the Plan.

         The details of your option are as follows:

         1. TOTAL NUMBER OF SHARES SUBJECT TO THIS OPTION. The total number of
shares of Common Stock subject to this option is ___________ (________).

         2. VESTING. Subject to the limitations contained herein, ___________
(_______) of the shares will vest (become exercisable) on _______, 19_______ and
_______ of the shares will then vest each month thereafter until either (i) you
cease to provide services to the Company for any reason, or (ii) this option
becomes fully vested.

         3. EXERCISE PRICE AND METHOD OF PAYMENT.

                  (a) EXERCISE PRICE. The exercise price of this option is
_________ ($______ ) per share, being not less than the fair market value of the
Common Stock on the date of grant of this option.

                  (b) METHOD OF PAYMENT. Payment of the exercise price per share
is due in full upon exercise of all or any part of each installment which has
accrued to you. You may elect, to the extent permitted by applicable statutes
and regulations, to make payment of the exercise price under one of the
following alternatives:

                           (i) Payment of the exercise price per share in cash
(including check) at the time of exercise;

                           (ii) Payment pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board which, prior to the
issuance of Common Stock, results in either the receipt of cash (or check) by
the Company or the receipt of irrevocable instructions to pay the aggregate
exercise price to the Company from the sales proceeds;


                                      -1-
<PAGE>

                           (iii) Provided that at the time of exercise the
Company's Common Stock is publicly traded and quoted regularly in the Wall
Street Journal, payment by delivery of already-owned shares of Common Stock,
held for the period required to avoid a charge to the Company's reported
earnings, and owned free and clear of any liens, claims, encumbrances or
security interests, which Common Stock shall be valued at its fair market value
on the date of exercise; or

                           (iv) Payment by a combination of the methods of
payment permitted by subparagraph 3(b)(i) through 3(b)(iii) above.

         4. WHOLE SHARES. This option may not be exercised for any number of
shares which would require the issuance of anything other than whole shares.

         5. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, this option may not be exercised unless the shares issuable
upon exercise of this option are then registered under the Securities Act of
1933, as amended (the "Act"), or, if such shares are not then so registered, the
Company has determined that such exercise and issuance would be exempt from the
registration requirements of the Act.

         6. TERM. The term of this option commences on ______________, 19
_______, the date of grant, and expires on _______________ (the "Expiration
Date," which date shall be no more than ten (10) years from date this option is
granted), unless this option expires sooner as set forth below or in the Plan.
In no event may this option be exercised on or after the Expiration Date. This
option shall terminate prior to the Expiration Date of its term as follows:
three (3) months after the termination of your Continuous Status as an Employee,
Director or Consultant with the Company or an Affiliate of the Company unless
one of the following circumstances exists:

                  (a) Your termination of Continuous Status as an Employee,
Director or Consultant is due to your disability. This option will then expire
on the earlier of the Expiration Date set forth above or twelve (12) months
following such termination of Continuous Status as an Employee, Director or
Consultant. You should be aware that if your disability is not considered a
permanent and total disability within the meaning of Section 422(c)(6) of the
Code, and you exercise this option more than three (3) months following the date
of your termination of employment, your exercise will be treated for tax
purposes as the exercise of a "nonstatutory stock option" instead of an
"incentive stock option."

                  (b) Your termination of Continuous Status as an Employee,
Director or Consultant is due to your death or your death occurs within three
(3) months following your termination of Continuous Status as an Employee,
Director or Consultant. This option will then expire on the earlier of the
Expiration Date set forth above or eighteen (18) months after your death.


                                      -2-
<PAGE>

                  (c) If during any part of such three (3) month period you may
not exercise your option solely because of the condition set forth in paragraph
5 above, then your option will not expire until the earlier of the Expiration
Date set forth above or until this option shall have been exercisable for an
aggregate period of three (3) months after your termination of Continuous Status
as an Employee, Director or Consultant.

                  (d) If your exercise of the option within three (3) months
after termination of your Continuous Status as an Employee, Director or
Consultant with the Company or with an Affiliate of the Company would result in
liability under section 16(b) of the Securities Exchange Act of 1934, as
amended, then your option will expire on the earlier of (i) the Expiration Date
set forth above, (ii) the tenth (10th) day after the last date upon which
exercise would result in such liability or (iii) six (6) months and ten (10)
days after the termination of your Continuous Status as an Employee, Director or
Consultant with the Company or an Affiliate of the Company.

         However, this option may be exercised following termination of
Continuous Status as an Employee, Director or Consultant only as to that number
of shares as to which it was exercisable on the date of termination of
Continuous Status as an Employee, Director or Consultant under the provisions of
paragraph 2 of this option.

         In order to obtain the federal income tax advantages associated with an
"incentive stock option," the Code requires that at all times beginning on the
date of grant of the option and ending on the day three (3) months before the
date of the option's exercise, you must be an employee of the Company or an
Affiliate of the Company, except in the event of your death or permanent and
total disability. The Company has provided for continued vesting or extended
exercisability of your option under certain circumstances for your benefit, but
cannot guarantee that your option will necessarily be treated as an "incentive
stock option" if you provide services to the Company or an Affiliate of the
Company as a consultant or exercise your option more than three (3) months after
the date your employment with the Company and all Affiliates of the Company
terminates.

         7. REPRESENTATIONS. By executing this option agreement, you hereby
warrant and represent that you are acquiring this option for your own account
and that you have no intention of distributing, transferring or selling all or
any part of this option except in accordance with the terms of this option
agreement and Section 25102(f) of the California Corporations Code. You also
hereby warrant and represent that you have either (i) preexisting personal or
business relationships with the Company or any of its officers, directors or
controlling persons, or (ii) the capacity to protect your own interests in
connection with the grant of this option by virtue of the business or financial
expertise of any of your professional advisors who are unaffiliated with and who
are not compensated by the Company or any of its affiliates, directly or
indirectly.


                                      -3-
<PAGE>

         8. EXERCISE.

                  (a) This option may be exercised, to the extent specified
above, by delivering a notice of exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require pursuant
to subsection 6(f) of the Plan.

                  (b) By exercising this option you agree that:

                           (i) as a precondition to the completion of any
exercise of this option, the Company may require you to enter an arrangement
providing for the payment by you to the Company of any tax withholding
obligation of the Company arising by reason of (1) the exercise of this option;
(2) the lapse of any substantial risk of forfeiture to which the shares are
subject at the time of exercise; or (3) the disposition of shares acquired upon
such exercise; and

                           (ii) you will notify the Company in writing within
fifteen (15) days after the date of any disposition of any of the shares of the
Common Stock issued upon exercise of this option that occurs within two (2)
years after the date of this option grant or within one (1) year after such
shares of Common Stock are transferred upon exercise of this option.

         9. TRANSFERABILITY. This option is not transferable, except by will or
by the laws of descent and distribution, and is exercisable during your life
only by you. Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company, you may designate a third party
who, in the event of your death, shall thereafter be entitled to exercise this
option.

         10. OPTION NOT A SERVICE CONTRACT. This option is not an employment
contract and nothing in this option shall be deemed to create in any way
whatsoever any obligation on your part to continue in the employ of the Company,
or of the Company to continue your employment with the Company. In addition,
nothing in this option shall obligate the Company or any Affiliate of the
Company, or their respective stockholders, Board of Directors, officers or
employees to continue any relationship which you might have as a Director or
Consultant for the Company or Affiliate of the Company.

         11. NOTICES. Any notices provided for in this option or the Plan shall
be given in writing and shall be deemed effectively given upon receipt or, in
the case of notices delivered by the Company to you, five (5) days after deposit
in the United States mail, postage prepaid, addressed to you at the address
specified below or at such other address as you hereafter designate by written
notice to the Company.

         12. GOVERNING PLAN DOCUMENT. This option is subject to all the
provisions of the Plan, a copy of which is attached hereto and its provisions
are hereby made a part of this option, including without limitation the
provisions of Section 6 of the Plan relating to option provisions, and is
further subject to all interpretations, amendments, rules and regulations which
may from time to time be promulgated and adopted pursuant to the Plan. In the
event of any conflict between the provisions of this option and those of the
Plan, the provisions of the Plan shall control.


                                      -4-
<PAGE>

         Dated the __________ day of _______________, 19 ___________.

                         Very truly yours,

                         AMERICAN TECHNOLOGY CORPORATION



                         By ___________________________________
                            Duly authorized on behalf
                            of the Board of Directors
ATTACHMENTS:

         American Technology Corporation 1997 Stock Option Plan
         Notice of Exercise


                                      -5-
<PAGE>

The undersigned:

                  (a) Acknowledges receipt of the foregoing option and the
attachments referenced therein and understands that all rights and liabilities
with respect to this option are set forth in the option and the Plan; and

                  (b) Acknowledges that as of the date of grant of this option,
it sets forth the entire understanding between the undersigned optionee and the
Company and its Affiliates regarding the acquisition of stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of (i) the options previously granted and delivered to the undersigned
under stock option plans of the Company, and (ii) the following agreements only:

         NONE ________________________
                    (Initial)

         OTHER _________________________

                  ____________________________________

                  ____________________________________


                                    ____________________________________
                                    OPTIONEE

                                    Address: ___________________________

                                             ___________________________


                                      -6-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.5.2
<SEQUENCE>3
<FILENAME>atc_10kex10-52.txt
<TEXT>
<PAGE>

                                                                  EXHIBIT 10.5.2


                         AMERICAN TECHNOLOGY CORPORATION

                            NONSTATUTORY STOCK OPTION

__________________________, Optionee:

         AMERICAN TECHNOLOGY CORPORATION (the "Company"), pursuant to its 1997
Stock Option Plan (the "Plan"), has granted to you, the optionee named above, an
option to purchase shares of the common stock of the Company ("Common Stock").
This option is not intended to qualify as and will not be treated as an
"incentive stock option" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").

         The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's employees
(including officers, directors or consultants). The grant of this option and the
issuance of shares upon the exercise of this option are intended to be exempt
from the securities qualification requirements of the California Corporations
Code pursuant to Section 25102(f) of that code. Defined terms not explicitly
defined in this agreement but defined in the Plan shall have the same
definitions as in the Plan.

         The details of your option are as follows:

         1. TOTAL NUMBER OF SHARES SUBJECT TO THIS OPTION. The total number of
shares of Common Stock subject to this option is ___________ (_________).


         2. VESTING. Subject to the limitations contained herein,
________________ (________) of the shares will vest (become exercisable) on
____________________, 19 _________ and __________ of the shares will then vest
each month thereafter until either (i) you cease to provide services to the
Company for any reason, or (ii) this option becomes fully vested.

         3. EXERCISE PRICE AND METHOD OF PAYMENT.

                  (a) EXERCISE PRICE. The exercise price of this option is
____________($____________) per share, being not less than 85% of the fair
market value of the Common Stock on the date of grant of this option.

                  (b) METHOD OF PAYMENT. Payment of the exercise price per share
is due in full upon exercise of all or any part of each installment which has
accrued to you. You may elect, to the extent permitted by applicable statutes
and regulations, to make payment of the exercise price under one of the
following alternatives:

                           (i) Payment of the exercise price per share in cash
(including check) at the time of exercise;

                           (ii) Payment pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board which, prior to the
issuance of Common Stock, results in either the receipt of cash (or check) by
the Company or the receipt of irrevocable instructions to pay the aggregate
exercise price to the Company from the sales proceeds;


                                      -1-
<PAGE>

                           (iii) Provided that at the time of exercise the
Company's Common Stock is publicly traded and quoted regularly in the Wall
Street Journal, payment by delivery of already-owned shares of Common Stock,
held for the period required to avoid a charge to the Company's reported
earnings, and owned free and clear of any liens, claims, encumbrances or
security interests, which Common Stock shall be valued at its fair market value
on the date of exercise; or

                           (iv) Payment by a combination of the methods of
payment permitted by subparagraph 3(b)(i) through 3(b)(iii) above.

         4. WHOLE SHARES. This option may not be exercised for any number of
shares which would require the issuance of anything other than whole shares.

         5. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, this option may not be exercised unless the shares issuable
upon exercise of this option are then registered under the Securities Act of
1933, as amended (the "Act") or, if such shares are not then so registered, the
Company has determined that such exercise and issuance would be exempt from the
registration requirements of the Act.

         6. TERM. The term of this option commences on ________________, 19
____________, the date of grant and expires on _________________________ (the
"Expiration Date," which date shall be no more than ten (10) years from the date
this option is granted), unless this option expires sooner as set forth below or
in the Plan. In no event may this option be exercised on or after the Expiration
Date. This option shall terminate prior to the Expiration Date as follows: three
(3) months after the termination of your Continuous Status as an Employee,
Director or Consultant with the Company or an Affiliate of the Company for any
reason or for no reason unless:

                  (a) such termination of Continuous Status as an Employee,
Director or Consultant is due to your disability, in which event the option
shall expire on the earlier of the Expiration Date set forth above or twelve
(12) months following such termination of Continuous Status as an Employee,
Director or Consultant; or

                  (b) such termination of Continuous Status as an Employee,
Director or Consultant is due to your death or your death occurs within three
(3) months following your termination for any other reason, in which event the
option shall expire on the earlier of the Expiration Date set forth above or
eighteen (18) months after your death; or

                  (c) during any part of such three (3) month period the option
is not exercisable solely because of the condition set forth in paragraph 5
above, in which event the option shall not expire until the earlier of the
Expiration Date set forth above or until it shall have been exercisable for an
aggregate period of three (3) months after the termination of Continuous Status
as an Employee, Director or Consultant; or

                  (d) exercise of the option within three (3) months after
termination of your Continuous Status as an Employee, Director or Consultant
with the Company or with an Affiliate of the Company would result in liability
under section 16(b) of the Securities Exchange Act of 1934 (the "Exchange Act),


                                      -2-
<PAGE>

in which case the option will expire on the earlier of (i) the Expiration Date
set forth above, (ii) the tenth (10th) day after the last date upon which
exercise would result in such liability or (iii) six (6) months and ten (10)
days after the termination of your Continuous Status as an Employee, Director or
Consultant with the Company or an Affiliate of the Company.

         However, this option may be exercised following termination of
Continuous Status as an Employee, Director or Consultant only as to that number
of shares as to which it was exercisable on the date of termination of
Continuous Status as an Employee, Director or Consultant under the provisions of
paragraph 2 of this option.

         7. REPRESENTATIONS. By executing this option agreement, you hereby
warrant and represent that you are acquiring this option for your own account
and that you have no intention of distributing, transferring or selling all or
any part of this option except in accordance with the terms of this option
agreement and Section 25102(f) of the California Corporations Code. You also
hereby warrant and represent that you have either (i) preexisting personal or
business relationships with the Company or any of its officers, directors or
controlling persons, or (ii) the capacity to protect your own interests in
connection with the grant of this option by virtue of the business or financial
expertise of any of your professional advisors who are unaffiliated with and who
are not compensated by the Company or any of its affiliates, directly or
indirectly.

         8. EXERCISE.

                  (a) This option may be exercised, to the extent specified
above, by delivering a notice of exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require pursuant
to subsection 6(f) of the Plan.

                  (b) By exercising this option you agree that as a precondition
to the completion of any exercise of this option, the Company may require you to
enter an arrangement providing for the cash payment by you to the Company of any
tax withholding obligation of the Company arising by reason of: (1) the exercise
of this option; (2) the lapse of any substantial risk of forfeiture to which the
shares are subject at the time of exercise; or (3) the disposition of shares
acquired upon such exercise. You also agree that any exercise of this option has
not been completed and that the Company is under no obligation to issue any
Common Stock to you until such an arrangement is established or the Company's
tax withholding obligations are satisfied, as determined by the Company.

         9. TRANSFERABILITY. This option is not transferable, except (i) by will
or by the laws of descent and distribution, or (ii) by written instruction, in a
form accepted by the Company, to your spouse, children, lineal ancestors and
lineal descendants (or to a trust created solely for the benefit of you and the
foregoing persons) or to an organization exempt from taxation pursuant to
Section 501(c)(3) of the Code or to which tax deductible charitable
contributions may be made under Section 170 of the Code (excluding such


                                      -3-
<PAGE>

organizations classified as private foundations under applicable regulations and
rulings), and is exercisable during your life only by you or a transferee
satisfying these conditions. Notwithstanding the foregoing, by delivering
written notice to the Company, in a form satisfactory to the Company, you may
designate a third party who, in the event of your death, shall thereafter be
entitled to exercise this option.

         10. OPTION NOT A SERVICE CONTRACT. This option is not an employment
contract and nothing in this option shall be deemed to create in any way
whatsoever any obligation on your part to continue in the employ of the Company,
or of the Company to continue your employment with the Company. In addition,
nothing in this option shall obligate the Company or any Affiliate of the
Company, or their respective stockholders, Board of Directors, officers, or
employees to continue any relationship which you might have as a Director or
Consultant for the Company or Affiliate of the Company.

         11. NOTICES. Any notices provided for in this option or the Plan shall
be given in writing and shall be deemed effectively given upon receipt or, in
the case of notices delivered by the Company to you, five (5) days after deposit
in the United States mail, postage prepaid, addressed to you at the address
specified below or at such other address as you hereafter designate by written
notice to the Company.

         12. GOVERNING PLAN DOCUMENT. This option is subject to all the
provisions of the Plan, a copy of which is attached hereto and its provisions
are hereby made a part of this option, including without limitation the
provisions of Section 6 of the Plan relating to option provisions, and is
further subject to all interpretations, amendments, rules and regulations which
may from time to time be promulgated and adopted pursuant to the Plan. In the
event of any conflict between the provisions of this option and those of the
Plan, the provisions of the Plan shall control.

         Dated the _________ day of ____________, 19_____.


                         Very truly yours,

                         AMERICAN TECHNOLOGY CORPORATION

                         By _______________________________________________
                            Duly authorized on behalf
                            of the Board of Directors
ATTACHMENTS:

         American Technology Corporation 1997 Stock Option Plan
         Notice of Exercise


                                      -4-
<PAGE>


The undersigned:

                  (a) Acknowledges receipt of the foregoing option and the
attachments referenced therein and understands that all rights and liabilities
with respect to this option are set forth in the option and the Plan; and

                  (b) Acknowledges that as of the date of grant of this option,
it sets forth the entire understanding between the undersigned optionee and the
Company and its Affiliates regarding the acquisition of stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of (i) the options previously granted and delivered to the undersigned
under stock option plans of the Company, and (ii) the following agreements only:

         NONE ____________________
                   (Initial)

         OTHER _________________________________

               _________________________________

               _________________________________



                                    __________________________________________
                                    OPTIONEE

                                    Address: _________________________________

                                             _________________________________



                                      -5-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.6.1
<SEQUENCE>4
<FILENAME>atc_10kex10-61.txt
<TEXT>
<PAGE>
                                                                  EXHIBIT 10.6.1


                         AMERICAN TECHNOLOGY CORPORATION

                            STOCK OPTION GRANT NOTICE

         AMERICAN TECHNOLOGY CORPORATION (the "Company"), pursuant to its 2002
Stock Option Plan (the "Plan") hereby grants to the Optionee named below a stock
option to purchase the number of shares of the Company's common stock set forth
below. This option is subject to all of the terms and conditions as set forth
herein and the Stock Option Agreement (attached hereto) and the Plan which are
incorporated herein in their entirety.

Optionee:
Grant No:                                           [NUMBER]
Date of Grant:
Shares Subject to Option:
Exercise Price Per Share:
Expiration Date:
Intended to be Incentive Stock Option:
VESTING SCHEDULE:
    Vesting Start Date                          Vesting Schedule
    ------------------                          ----------------


ADDITIONAL TERMS/ACKNOWLEDGMENTS: The undersigned Optionee acknowledges receipt
of, and represents that the Optionee has read, understands, accepts and agrees
to the terms of the following: this Grant Notice, the Stock Option Agreement and
the Plan (including, but not limited to, the binding arbitration provision in
Section 3.8 of the Plan). Optionee hereby accepts the Option subject to all of
its terms and conditions and further acknowledges that as of the Date of Grant,
this Grant Notice, the Stock Option Agreement and the Plan set forth the entire
understanding between Optionee and the Company regarding the acquisition of
stock in the Company and supersedes all prior oral and written agreements
pertaining to this particular option.

NOTE: THE OPTIONEE IS SOLELY RESPONSIBLE FOR ANY ELECTION TO EXERCISE THE
OPTION, AND THE COMPANY SHALL HAVE NO OBLIGATION WHATSOEVER TO PROVIDE NOTICE TO
THE OPTIONEE OF ANY MATTER, INCLUDING, BUT NOT LIMITED TO, THE DATE THE OPTION
TERMINATES.

AMERICAN TECHNOLOGY CORPORATION:                OPTIONEE:

By:____________________________                 By:_____________________________
   Name:
   Title:                                       Date:___________________________
Dated:

Attachment:       Stock Option Agreement


                                      -1-
<PAGE>

                         AMERICAN TECHNOLOGY CORPORATION
                             STOCK OPTION AGREEMENT

Pursuant to the Grant Notice and this Stock Option Agreement, American
Technology Corporation (the "Company") has granted you an Option to purchase the
number of shares of the Company's common stock ("Stock") indicated in the Grant
Notice at the exercise price indicated in the Grant Notice. Defined terms not
explicitly defined in this Stock Option Agreement but defined in the American
Technology Corporation 2002 Stock Option Plan (the "Plan") shall have the same
definitions as in the Plan.

        The details of this Option are as follows:

         1. VESTING. Except as otherwise provided in the Plan, this option will
vest as provided in the Grant Notice.

         2. EXERCISE OF THE OPTION.

                  2.1 METHOD OF EXERCISE. You may exercise the vested portion of
this Option at any time prior to the expiration of the Option by delivering a
notice of exercise in such form as may be designated by the Company from time to
time together with the exercise price to the Secretary of the Company, or to
such other person as the Company may designate, during regular business hours
and prior to the expiration of the Option, together with such additional
documents as the Company may then require pursuant to the terms of the Plan.

                  2.2 METHOD OF PAYMENT. Payment of the exercise price may be by
cash (or check), or pursuant to a program developed under Regulation T as
promulgated by the Federal Reserve Board which, prior to the issuance of Stock,
results in either the receipt of cash (or check) by the Company or the receipt
of irrevocable instructions to a broker which provides for the payment of the
aggregate exercise price to the Company, or a combination of the above methods,
as the Company may designate from time to time.

                  2.3 TAX WITHHOLDING. By exercising this Option you agree that
as a condition to any exercise of this Option, the Company may withhold from
your pay and any other amounts payable to you, or require you to enter an
arrangement providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of (1) the exercise of
this Option; (2) the lapse of any substantial risk of forfeiture to which the
Stock is subject at the time of exercise; or (3) the disposition of Stock
acquired upon such exercise.

                  2.4 RESPONSIBILITY FOR EXERCISE. You are responsible for
taking any and all actions as may be required to exercise this Option in a
timely manner and for properly executing any such documents as may be required
for exercise in accordance with such rules and procedures as may be established
from time to time. By signing this Agreement you acknowledge that information
regarding the procedures and requirements for this exercise of the Option is
available to you on request. The Company shall have no duty or obligation to
notify you of the expiration date of this Option.


                                      -2-
<PAGE>

         3. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, this Option may not be exercised unless the Stock issuable
upon exercise of this Option is then registered under the Securities Act or, if
such Stock is not then so registered, the Company has determined that such
exercise and issuance would be exempt from the registration requirements of the
Securities Act.

         4. TERMINATION OF THE OPTION. The term of this Option commences on the
Date of Grant (as specified in the Grant Notice) and expires and shall no longer
be exercisable upon the earliest of: (a) the Expiration Date indicated in the
Grant Notice;

                  (b) the tenth (10th) anniversary of the Date of Grant;

                  (c) the last day for exercising the Option following
termination of your Service as described in the Plan; or

                  (d) a Change of Control, to the extent provided in the Plan.

         5. OPTION NOT A SERVICE CONTRACT. This Option is not an employment or
service contract and nothing in this Stock Option Agreement , the Grant Notice
or the Plan shall be deemed to create in any way whatsoever any obligation on
your part to continue in the service of the Company, or of the Company to
continue your service with the Company. In addition, nothing in your Option
shall obligate the Company, its stockholders, Board, Officers or Employees to
continue any relationship which you might have as a Director or Consultant for
the Company.

         6. REPRESENTATIONS. By executing this Stock Option Agreement, you
hereby warrant and represent that you are acquiring this Option for your own
account and that you have no intention of distributing, transferring or selling
all or any part of this Option except in accordance with the terms of this Stock
Option Agreement and Section 25102(f) of the California Corporations Code. You
also hereby warrant and represent that you have either (i) preexisting personal
or business relationships with the Company or any of its officers, directors or
controlling persons, or (ii) the capacity to protect your own interests in
connection with the grant of this Option by virtue of the business or financial
expertise of any of your professional advisors who are unaffiliated with and who
are not compensated by the Company or any of its affiliates, directly or
indirectly.

         7. NOTICES. Any notices provided for in this Stock Option Agreement,
the Grant Notice or the Plan shall be given in writing and shall be deemed
effectively given upon receipt or, in the case of notices delivered by the
Company to you, five (5) days after deposit in the United States mail, postage
prepaid, addressed to you at the last address you provided to the Company.

         8. ARBITRATION. Any dispute or claim concerning any Options granted (or
not granted) pursuant to the Plan and any other disputes or claims relating to
or arising out of the Plan shall be fully, finally and exclusively resolved by
binding arbitration conducted by the American Arbitration Association pursuant
to the commercial arbitration rules in San Diego, California. By accepting an
Option, Participants and the Company waive their respective rights to have any
such disputes or claims tried by a judge or jury.


                                      -3-
<PAGE>

         9. AMENDMENT. The Board may amend your Option at any time, provided no
such amendment may adversely affect the Option or any unexercised portion of
your Option, without your consent unless such amendment is necessary to comply
with any applicable law or government regulation. No amendment or addition to
this Stock Option Agreement shall be effective unless in writing or, in such
electronic form as may be designated by the Company.

         10. GOVERNING PLAN DOCUMENT. Your Option is subject to this Stock
Option Agreement, the Grant Notice and all the provisions of the Plan, the
provisions of which are hereby made a part of this Stock Option Agreement, and
is further subject to all interpretations, amendments, rules and regulations
which may from time to time be promulgated and adopted pursuant to the Plan. In
the event of any conflict between the provisions of this Stock Option Agreement,
the Grant Notice and those of the Plan, the provisions of the Plan shall
control.


                                      -4-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.25
<SEQUENCE>5
<FILENAME>atc_10kex10-25.txt
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.25


                     TABLE OF INDUCEMENT STOCK OPTION GRANTS

         From time to time, as an inducement to employment, the registrant has
granted to certain of its employees that are not executive officers
non-qualified stock options in accordance with individual compensation
arrangements that have not been approved by the registrant's security holders
(collectively, the "INDUCEMENT OPTIONS"). All Inducement Options are documented
pursuant to the form of Inducement Grant Notice and Inducement Stock Option
Agreement attached hereto as Exhibit 10.24.

         The table set forth below lists the Inducement Options granted by the
registrant to certain of its employees that are not executive officers, and the
principal terms thereof. Each of the following options is a non-statutory
option, has a five year term and generally vests 25% on the first anniversary of
the grant date and then quarterly thereafter for the next 12 quarters, subject
to continued employment and other conditions.

- ---------------------------- ---------------- ---------------
 Date of Grant                Shares           Exercise Price
                              Underlying
                              Option
- ---------------------------- ---------------- ---------------
 9/21/04                        3,500            $6.14
- ---------------------------- ---------------- ---------------
 9/21/04                       15,000            $6.14
- ---------------------------- ---------------- ---------------
 9/21/04                        1,000            $6.14
- ---------------------------- ---------------- ---------------
 9/21/04                       10,000            $6.14
- ---------------------------- ---------------- ---------------
 9/21/04                       17,500            $6.14
- ---------------------------- ---------------- ---------------
 10/26/04                       2,500            $6.21
- ---------------------------- ---------------- ---------------
 10/26/04                      12,500            $6.21
- ---------------------------- ---------------- ---------------
 10/26/04                       5,000            $6.21
- ---------------------------- ---------------- ---------------
 11/16/04                       1,500            $6.70
- ---------------------------- ---------------- ---------------
 11/16/04                       2,500            $6.70
- ---------------------------- ---------------- ---------------
 12/22/04                      18,000           $10.06
- ---------------------------- ---------------- ---------------
 12/22/04                      20,000           $10.06
- ---------------------------- ---------------- ---------------
 12/22/04                       5,000           $10.06
- ---------------------------- ---------------- ---------------
 12/22/04                       2,500           $10.06
- ---------------------------- ---------------- ---------------
 12/22/04                      25,000           $10.06
- ---------------------------- ---------------- ---------------
 12/22/04                       6,000           $10.06
- ---------------------------- ---------------- ---------------


                                      -1-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.28
<SEQUENCE>6
<FILENAME>atc_10kex10-28.txt
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.28


                         AMERICAN TECHNOLOGY CORPORATION

                      INDUCEMENT STOCK OPTION GRANT NOTICE

         AMERICAN TECHNOLOGY CORPORATION (the "Company") hereby grants to the
Optionee named below, an employee of the Company, as an inducement material to
the Optionee's entering into employment with the Company, a stock option to
purchase the number of shares of the Company's common stock set forth below.
This option is subject to all of the terms and conditions as set forth herein
and the Stock Option Agreement (attached hereto) which is incorporated herein in
its entirety.

Optionee:                                              Michael A. Russell
Grant No:                                              I-101
Date of Grant:                                         June 30, 2004
Shares Subject to Option:                              100,000
Exercise Price Per Share:                              $5.92 (1)
Expiration Date:                                       June 30, 2009
Intended to be Incentive Stock Option:                 No

(1) The closing price reported on Nasdaq on the trading day prior to the Date of
Grant.

VESTING SCHEDULE:
Vesting Start Date         Vesting Schedule
- ------------------         ----------------
June 30, 2004              Subject to continuing Service (as defined in the
                           Stock Option Agreement) this option becomes
                           exercisable with respect to 1/4 of the Shares Subject
                           to Grant on the one year anniversary of the Vesting
                           Start Date. Thereafter, subject to continuing
                           Service, this option becomes exercisable with respect
                           to an additional 3/48 of the Shares Subject to Grant
                           on each subsequent three month anniversary of the
                           Vesting Start Date, until this option is fully
                           vested.

ADDITIONAL TERMS/ACKNOWLEDGMENTS: The undersigned Optionee acknowledges receipt
of, and represents that the Optionee has read, understands, accepts and agrees
to the terms of this Grant Notice and the Stock Option Agreement. Optionee
hereby accepts the Option subject to all of its terms and conditions and further
acknowledges that as of the Date of Grant, this Grant Notice and the Stock
Option Agreement set forth the entire understanding between Optionee and the
Company regarding the acquisition of stock in the Company and supersede all
prior oral and written agreements pertaining to this particular option.


                                      -1-
<PAGE>

NOTE: THE OPTIONEE IS SOLELY RESPONSIBLE FOR ANY ELECTION TO EXERCISE THE
OPTION, AND THE COMPANY SHALL HAVE NO OBLIGATION WHATSOEVER TO PROVIDE NOTICE TO
THE OPTIONEE OF ANY MATTER, INCLUDING, BUT NOT LIMITED TO, THE DATE THE OPTION
TERMINATES.

AMERICAN TECHNOLOGY CORPORATION:                         OPTIONEE:

By:/s/ Kalani Jones                                      By: /s/ Michael Russell
   ----------------------
   Kalani Jones/President
Dated: June 30, 2004                                     Date: June 30, 2004


                                      -2-
<PAGE>

                         AMERICAN TECHNOLOGY CORPORATION
                        INDUCEMENT STOCK OPTION AGREEMENT

Pursuant to the Grant Notice and this Stock Option Agreement ("Agreement"),
American Technology Corporation (the "Company") has granted to the Optionee
named in the Grant Notice ("YOU" or the "OPTIONEE") an Option to purchase the
number of shares of the Company's common stock ("Stock") indicated in the Grant
Notice at the exercise price indicated in the Grant Notice.

                  The details of this Option are as follows:

         1. DEFINITIONS AND CONSTRUCTION.

                  1.1 DEFINITIONS. Whenever used herein, the following terms
shall have their respective meanings set forth below:

                           (a) "AFFILIATE" means (i) an entity, other than a
Parent Corporation, that directly, or indirectly through one or more
intermediary entities, controls the Company or (ii) an entity, other than a
Subsidiary Corporation, that is controlled by the Company directly, or
indirectly through one or more intermediary entities, or (iii) an entity which
the Board designates as an Affiliate. For this purpose, the term "control"
(including the term "controlled by") means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
the relevant entity, whether through the ownership of voting securities, by
contract or otherwise; or shall have such other meaning assigned such term for
the purposes of registration on Form S-8 under the Securities Act.

                           (b) "BOARD" means the Board of Directors of the
Company. If one or more Committees have been appointed by the Board to
administer outstanding stock options, "BOARD" also means such Committee(s).

                           (c) A "CHANGE IN CONTROL" shall mean an Ownership
Change Event or a series of related Ownership Change Events (collectively, a
"TRANSACTION") wherein the stockholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting securities of the Company or, in the case of a Transaction
described in Section 1.1(q)(iii), the corporation or other business entity to
which the assets of the Company were transferred (the "TRANSFEREE"), as the case
may be. The Board shall determine in its discretion whether multiple sales or
exchanges of the voting securities of the Company or multiple Ownership Change
Events are related. Notwithstanding the preceding sentence, a Change in Control
shall not include a Spinoff Transaction.

                           (d) "CODE" means the Internal Revenue Code of 1986,
as amended, and any applicable regulations promulgated thereunder.

                           (e) "COMMITTEE" means the Compensation Committee or
other committee of the Board duly appointed to administer this Agreement and
having such powers as shall be specified by the Board. Unless the powers of the
Committee have been specifically limited, the Committee shall have all of the
powers of the Board granted herein.


                                      -1-
<PAGE>

                           (f) "COMPANY" means American Technology Corporation,
a Delaware corporation, or any Successor.

                           (g) "CONSULTANT" means a person engaged to provide
consulting or advisory services (other than as an Employee or a Director) to a
Participating Company.

                           (h) "DIRECTOR" means a member of the Board or of the
board of directors of any other Participating Company.

                           (i) "DISABILITY" means the Optionee has been
determined by the long-term disability insurer of the Participating Company
Group as eligible for disability benefits under the long-term disability plan of
the Participating Company Group or the Optionee has been determined eligible for
Supplemental Security Income benefits by the Social Security Administration of
the United States of America.

                           (j) "EMPLOYEE" means any person treated as an
employee (including an Officer or a Director who is also treated as an employee)
in the records of a Participating Company. The Company shall determine in good
faith and in the exercise of its discretion whether the Optionee has become or
has ceased to be an Employee and the effective date of the Optionee's employment
or termination of employment, as the case may be.

                           (k) "EXCHANGE ACT" means the Securities Exchange Act
of 1934, as amended.

                           (l) "FAIR MARKET VALUE" means, as of any date, the
value of the Stock determined as follows:

                                    (i) If the Stock is listed on any
established stock exchange or traded on the Nasdaq Stock Market or the Nasdaq
SmallCap Market, the Fair Market Value of a share of Stock shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or if the stock is traded on more than one
exchange or market, the exchange or market with the greatest volume of trading
in the Stock) on the last market trading day prior to the day of determination,
as reported in The Wall Street Journal or such other source as the Board deems
reliable.

                                    (ii) If the common stock is quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a share of common stock shall be the mean between the bid and
asked prices for the common stock on the last market trading day prior to the
day of determination, as reported in the Wall Street Journal or such other
source as the Board deems reliable.

                                    (iii) In the absence of such markets for the
Stock, the Fair Market Value shall be determined in good faith by the Board.


                                      -2-
<PAGE>

                           (m) "INCENTIVE STOCK OPTION" means an Option intended
to be (as set forth in the Option Agreement) and which qualifies as an incentive
stock option within the meaning of Section 422(b) of the Code.

                           (n) "INSIDER" means an Officer, a Director of the
Company or other person whose transactions in Stock are subject to Section 16 of
the Exchange Act.

                           (o) "NON-CONTROL AFFILIATE" means any entity in which
any Participating Company has an ownership interest and which the Board shall
designate as a Non-Control Affiliate.

                           (p) "OFFICER" means any person designated by the
Board as an officer of the Company.

                           (q) An "OWNERSHIP CHANGE EVENT" shall be deemed to
have occurred if any of the following occurs with respect to the Company: (i)
the direct or indirect sale or exchange in a single or series of related
transactions by the stockholders of the Company of more than fifty percent (50%)
of the voting stock of the Company; (ii) a merger or consolidation in which the
Company is a party; (iii) the sale, exchange, or transfer of all or
substantially all, as determined by the Board in its discretion, of the assets
of the Company; or (iv) a liquidation or dissolution of the Company.

                           (r) "PARENT CORPORATION" means any present or future
"parent corporation" of the Company, as defined in Section 424(e) of the Code.

                           (s) "PARTICIPATING COMPANY" means the Company or any
Parent Corporation or Subsidiary Corporation or Affiliate.

                           (t) "PARTICIPATING COMPANY GROUP" means, at any point
in time, all entities collectively which are then Participating Companies.

                           (u) "RULE 16B-3" means Rule 16b-3 under the Exchange
Act, as amended from time to time, or any successor rule or regulation.

                           (v) "SECURITIES ACT" means the Securities Act of
1933, as amended.

                           (w) "SERVICE" means

                                    (i) the Optionee's employment or service
with the Participating Company Group, whether in the capacity of an Employee, a
Director or a Consultant. The Optionee's Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Optionee
renders Service to the Participating Company Group or a change in the
Participating Company for which the Optionee renders such Service, provided that
there is no interruption or termination of the Optionee's Service. Furthermore,
only to such extent as may be provided by the Company's leave policy, the
Optionee's Service with the Participating Company Group shall not be deemed to
have terminated if the Optionee takes any military leave, sick leave, or other
leave of absence approved by the Company. Notwithstanding the foregoing, a leave
of absence shall be treated as Service for purposes of vesting only to such
extent as may be


                                      -3-
<PAGE>

provided by the Company's leave policy. The Optionee's Service shall be deemed
to have terminated either upon an actual termination of Service or upon the
entity for which the Optionee performs Service ceasing to be a Participating
Company; except that if the entity for which Optionee performs Service is a
Subsidiary Corporation and ceases to be a Participating Company as a result of
the distribution of the voting stock of such Subsidiary Corporation to the
stockholders of the Company, Service shall not be deemed to have terminated as a
result of such distribution. Subject to the foregoing, the Company, in its
discretion, shall determine whether the Optionee's Service has terminated and
the effective date of such termination.

                                    (ii) Notwithstanding any other provision of
this Section, an Optionee's Service shall not be deemed to have terminated
merely because the Participating Company for which the Optionee renders Service
ceases to be a member of the Participating Company Group by reason of a Spinoff
Transaction, nor shall Service be deemed to have terminated upon resumption of
Service from the Spinoff Company to a Participating Company. For all purposes
under this Agreement, the Optionee's Service shall include Service, whether in
the capacity of an Employee, Director or a Consultant, for the Spinoff Company
provided the Optionee was employed by the Participating Company Group
immediately prior to the Spinoff Transaction. Notwithstanding the foregoing, if
the Company's auditors determine that the provisions or operation of the
preceding two sentences would cause the Company to incur a compensation expense
and provided further that in the absence of the preceding two sentences no such
compensation expense would be incurred, then the two preceding sentences shall
be without force or effect, and the vesting and exercisability of each
outstanding Option and any shares acquired upon the exercise thereof shall be
determined under any other applicable provision of this Agreement.

                           (x) "SPINOFF COMPANY" means a Participating Company
which ceases to be such as a result of a Spinoff Transaction.

                           (y) "SPINOFF TRANSACTION" means a transaction in
which the voting stock of an entity in the Participating Company Group is
distributed to the shareholders of a parent corporation as defined by Section
424(e) of the Code, of such entity.

                           (z) "STOCK" means the common stock of the Company, as
adjusted from time to time in accordance with Section 4.2.

                                    (aa) "SUBSIDIARY CORPORATION" means any
present or future "subsidiary corporation" of the Company, as defined in Section
424(f) of the Code.

                                    (bb) "SUCCESSOR" means a corporation into or
with which the Company is merged or consolidated or which acquires all or
substantially all of the assets of the Company and which is designated by the
Board as a Successor for purposes of this Agreement.

         1.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Agreement. Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the singular. Use
of the term "or" is not intended to be exclusive, unless the context clearly
requires otherwise.


                                      -4-
<PAGE>

         2. VESTING. Except as otherwise provided in this Agreement, this option
will vest as provided in the Grant Notice.

         3. EXERCISE OF THE OPTION.

                  3.1 METHOD OF EXERCISE. You may exercise the vested portion of
this Option at any time prior to the expiration of the Option by delivering a
notice of exercise in such form as may be designated by the Company from time to
time together with the exercise price to the Secretary of the Company, or to
such other person as the Company may designate, during regular business hours
and prior to the expiration of the Option, together with such additional
documents as the Company may then require.

                  3.2 METHOD OF PAYMENT. Payment of the exercise price may be by
cash (or check), or pursuant to a program developed under Regulation T as
promulgated by the Federal Reserve Board which, prior to the issuance of Stock,
results in either the receipt of cash (or check) by the Company or the receipt
of irrevocable instructions to a broker which provides for the payment of the
aggregate exercise price to the Company, or a combination of the above methods,
as the Company may designate from time to time. The Company reserves, at any and
all times, the right, in the Company's sole and absolute discretion, to
establish, decline to approve or terminate any program or procedures for the
exercise of Options by means of a Cashless Exercise.

                  3.3 TAX WITHHOLDING. By exercising this Option you agree that
as a condition to any exercise of this Option, the Company may withhold from
your pay and any other amounts payable to you, or require you to enter an
arrangement providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of (1) the exercise of
this Option; or (2) the disposition of Stock acquired upon such exercise.

                  3.4 RESPONSIBILITY FOR EXERCISE. You are responsible for
taking any and all actions as may be required to exercise this Option in a
timely manner and for properly executing any such documents as may be required
for exercise in accordance with such rules and procedures as may be established
from time to time. By signing this Agreement you acknowledge that information
regarding the procedures and requirements for this exercise of the Option is
available to you on request. The Company shall have no duty or obligation to
notify you of the expiration date of this Option.

         4. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, this Option may not be exercised unless the Stock issuable
upon exercise of this Option is then registered under the Securities Act or, if
such Stock is not then so registered, the Company has determined that such
exercise and issuance would be exempt from the registration requirements of the
Securities Act.

         5. TERMINATION OF THE OPTION. The term of this Option commences on the
Date of Grant (as specified in the Grant Notice) and expires and shall no longer
be exercisable upon the earliest of:


                                      -5-
<PAGE>

                  5.1 the Expiration Date indicated in the Grant Notice;

                  5.2 the last day for exercising the Option following
termination of your Service as described in Section 6 below; or

                  5.3 a Change of Control, to the extent provided in Section 7
below.

         6. EFFECT OF TERMINATION OF SERVICE.

                  6.1 OPTION EXERCISABILITY. Subject to earlier termination of
the Option as otherwise provided herein, the Option shall be exercisable after
the Optionee's termination of Service only during the applicable time period
determined in accordance with this Section 6 and thereafter shall terminate.

                           (a) DISABILITY. If the Optionee's Service terminates
because of the Disability of the Optionee, the Option shall continue for the
period of such Disability and may be exercised by the Optionee at any time
during the period of Disability but in any event no later than the Expiration
Date.

                           (b) DEATH. If the Optionee's Service terminates
because of the death or because of the Disability of the Optionee and such
termination is subsequently followed by the death of the Optionee, (A) the
exercisability and vesting of the Option shall be accelerated effective upon the
Optionee's death, and (B) the Option, to the extent unexercised and exercisable
on the date of the Optionee's death, may be exercised by the Optionee's legal
representative or other person who acquired the right to exercise the Option by
reason of the Optionee's death at any time prior to the expiration of twelve
(12) months after the date of the Optionee's death, but in any event no later
than the Expiration Date.

                           (c) TERMINATION UPON TRANSFER TO NON-CONTROL
AFFILIATE. If at the request of the Company, the Optionee transfers Service to a
Non-Control Affiliate and the Optionee's Service ceases as a result, then,
subject to the Optionee's execution of a general release of claims form
reasonably satisfactory to the Company, the Option, to the extent unexercised
and exercisable on the date on which the Optionee's Service terminated, may be
exercised by the Optionee (or the Optionee's guardian or legal representative)
at any time prior to the expiration of twelve (12) months after the date on
which the Optionee's Service terminated, but in any event no later than the
Expiration Date.

                           (d) TERMINATION AFTER CHANGE IN CONTROL. If the
Optionee's Service ceases as a result of Termination After Change in Control (as
defined below), then (A) the exercisability and vesting of the Option shall be
accelerated effective as of the date on which the Optionee's Service terminated,
and (B) the Option, to the extent unexercised and exercisable on the date on
which the Optionee's Service terminated, may be exercised by the Optionee (or
the Optionee's guardian or legal representative) at any time prior to the
expiration of six (6) months after the date on which the Optionee's Service
terminated, but in any event no later than the Expiration Date.

                           (e) OTHER TERMINATION OF SERVICE. If the Optionee's
Service with the Participating Company Group terminates for any reason except
Disability, death, Transfer to a Non-Control Affiliate, or Termination after
Change in Control, the Option, to the extent unexercised and exercisable by the


                                      -6-
<PAGE>

Optionee on the date on which the Optionee's Service terminates, may be
exercised by the Optionee at any time prior to the expiration of thirty (30)
days after the date on which the Optionee's Service terminates, but in any event
no later than the Expiration Date.

                  6.2 EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding
the foregoing, other than termination for Cause, if the exercise of an Option
within the applicable time periods set forth in Section 6.1 is prevented by the
provisions of Section 4 above, the Option shall remain exercisable until three
(3) months after the date the Optionee is notified by the Company that the
Option is exercisable, but in any event no later than the Expiration Date.

                  6.3 EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(B).
Notwithstanding the foregoing, other than termination for Cause, if a sale
within the applicable time periods set forth in Section 6.1 of shares acquired
upon the exercise of the Option would subject the Optionee to suit under Section
16(b) of the Exchange Act, the Option shall remain exercisable until the
earliest to occur of (i) the tenth (10th) day following the date on which a sale
of such shares by the Optionee would no longer be subject to such suit, (ii) the
one hundred and ninetieth (190th) day after the Optionee's termination of
Service, or (iii) the Expiration Date.

                  6.4 CERTAIN DEFINITIONS.

                           (a) "CAUSE" shall mean any of the following: (1) the
Optionee's theft, dishonesty, or falsification of any Participating Company
documents or records; (2) the Optionee's improper use or disclosure of a
Participating Company's confidential or proprietary information; (3) any action
by the Optionee which has a detrimental effect on a Participating Company's
reputation or business; (4) the Optionee's failure or inability to perform any
reasonable assigned duties after written notice from a Participating Company of,
and a reasonable opportunity to cure, such failure or inability; (5) any
material breach by the Optionee of any employment or service agreement between
the Optionee and a Participating Company, which breach is not cured pursuant to
the terms of such agreement; (6) the Optionee's conviction (including any plea
of guilty or nolo contendere) of any criminal act which impairs the Optionee's
ability to perform his duties with a Participating Company; or (7) violation of
a material Company policy.

                           (b) "GOOD REASON" shall mean any one or more of the
following:

                                    (i) without the Optionee's express written
consent, the assignment to the Optionee of any duties, or any limitation of the
Optionee's responsibilities, substantially inconsistent with the Optionee's
positions, duties, responsibilities and status with the Participating Company
Group immediately prior to the date of the Change in Control;

                                    (ii) without the Optionee's express written
consent, the relocation of the principal place of the Optionee's employment or
service to a location that is more than fifty (50) miles from the Optionee's
principal place of employment or service immediately prior to the date of the
Change in Control, or the imposition of travel requirements substantially more
demanding of the Optionee than such travel requirements existing immediately
prior to the date of the Change in Control;


                                      -7-
<PAGE>

                                    (iii) any failure by the Participating
Company Group to pay, or any material reduction by the Participating Company
Group of, (A) the Optionee's base salary in effect immediately prior to the date
of the Change in Control (unless reductions comparable in amount and duration
are concurrently made for all other employees of the Participating Company Group
with responsibilities, organizational level and title comparable to the
Optionee's), or (B) the Optionee's bonus compensation, if any, in effect
immediately prior to the date of the Change in Control (subject to applicable
performance requirements with respect to the actual amount of bonus compensation
earned by the Optionee);

                                    (iv) any failure by the Participating
Company Group to (A) continue to provide the Optionee with the opportunity to
participate, on terms no less favorable than those in effect for the benefit of
any employee or service provider group which customarily includes a person
holding the employment or service provider position or a comparable position
with the Participating Company Group then held by the Optionee, in any benefit
or compensation plans and programs, including, but not limited to, the
Participating Company Group's life, disability, health, dental, medical,
savings, profit sharing, stock purchase and retirement plans, if any, in which
the Optionee was participating immediately prior to the date of the Change in
Control, or their equivalent, or (B) provide the Optionee with all other fringe
benefits (or their equivalent) from time to time in effect for the benefit of
any employee group which customarily includes a person holding the employment or
service provider position or a comparable position with the Participating
Company Group then held by the Optionee;

                                    (v) any breach by the Participating Company
Group of any material agreement between the Optionee and a Participating Company
concerning Optionee's employment; or

                                    (vi) any failure by the Company to obtain
the assumption of any material agreement between the Optionee and the Company
concerning the Optionee's employment by a successor or assign of the Company.

                           (c) "TERMINATION AFTER CHANGE IN CONTROL" shall mean
either of the following events occurring within twenty-four (24) months after a
Change in Control:

                                    (i) termination by the Participating Company
Group of the Optionee's Service with the Participating Company Group for any
reason other than for Cause; or

                                    (ii) the Optionee's resignation for Good
Reason from all capacities in which the Optionee is then rendering Service to
the Participating Company Group within a reasonable period of time following the
event constituting Good Reason.

Notwithstanding any provision herein to the contrary, Termination After Change
in Control shall not include any termination of the Optionee's Service with the
Participating Company Group which (1) is for Cause; (2) is a result of the
Optionee's death or Disability; (3) is a result of the Optionee's voluntary
termination of Service other than for Good Reason; or (4) occurs prior to the
effectiveness of a Change in Control.


                                      -8-
<PAGE>

         7. CHANGE IN CONTROL. In the event of a Change in Control, the
surviving, continuing, successor, or purchasing corporation or other business
entity or parent thereof, as the case may be (the "ACQUIRING Corporation"), may,
without the consent of the Optionee, either assume the Company's rights and
obligations the Option or substitute for the Option substantially equivalent
options for the Acquiring Corporation's stock. In the event the Acquiring
Corporation elects not to assume or substitute for the Option in connection with
a Change in Control, the exercisability and vesting of the Option shall be
accelerated, effective as of the date ten (10) days prior to the date of the
Change in Control. The exercise or vesting of this Option that was permissible
solely by reason of this Section shall be conditioned upon the consummation of
the Change in Control. To the extent this Option is neither assumed or
substituted for by the Acquiring Corporation in connection with the Change in
Control nor exercised as of the date of the Change in Control, it shall
terminate and cease to be outstanding effective as of the date of the Change in
Control. Notwithstanding the foregoing, shares acquired upon exercise of the
Option prior to the Change in Control and any consideration received pursuant to
the Change in Control with respect to such shares shall continue to be subject
to all applicable provisions of the Agreement. Furthermore, notwithstanding the
foregoing, if the corporation the stock of which is subject to the Option
immediately prior to an Ownership Change Event described in Section 1.1(q)(i)
constituting a Change in Control is the surviving or continuing corporation and
immediately after such Ownership Change Event less than fifty percent (50%) of
the total combined voting power of its voting stock is held by another
corporation or by other corporations that are members of an affiliated group
within the meaning of Section 1504(a) of the Code without regard to the
provisions of Section 1504(b) of the Code, the Option shall not terminate unless
the Board otherwise provides in its discretion.

         8. OPTION NOT A SERVICE CONTRACT. This Option is not an employment or
service contract and nothing in this Agreement or the Grant Notice shall be
deemed to create in any way whatsoever any obligation on your part to continue
in the service of the Company, or of the Company to continue your service with
the Company. In addition, nothing in your Option shall obligate the Company, its
stockholders, Board, Officers or Employees to continue any relationship which
you might have as a Director or Consultant for the Company.

         9. ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number and class of shares subject
to the Option and in the exercise price per share of the Option. If a majority
of the shares of Stock are exchanged for, converted into, or otherwise become
(whether or not pursuant to an Ownership Change Event) shares of another
corporation (the "NEW SHARES"), the Board may unilaterally amend this Agreement
to provide that the Option is exercisable for New Shares. In the event of any
such amendment, the number of shares subject to, and the exercise price per
share of, the Option shall be adjusted in a fair and equitable manner as
determined by the Board, in its discretion. Notwithstanding the foregoing, any
fractional share resulting from an adjustment pursuant to this Section shall be
rounded down to the nearest whole number, and in no event may the exercise price
of the Option be decreased to an amount less than the par value, if any, of the
Stock subject to the Option.


                                      -9-
<PAGE>

         10. REPRESENTATIONS. By executing this Agreement, you hereby warrant
and represent that you are acquiring this Option for your own account and that
you have no intention of distributing, transferring or selling all or any part
of this Option except in accordance with the terms of this Agreement and Section
25102(f) of the California Corporations Code. You also hereby warrant and
represent that you have either (i) preexisting personal or business
relationships with the Company or any of its officers, directors or controlling
persons, or (ii) the capacity to protect your own interests in connection with
the grant of this Option by virtue of the business or financial expertise of you
or any of your professional advisors who are unaffiliated with and who are not
compensated by the Company or any of its affiliates, directly or indirectly.

         11. NOTICES. Any notices provided for in this Agreement or the Grant
Notice shall be given in writing and shall be deemed effectively given upon
receipt or, in the case of notices delivered by the Company to you, five (5)
days after deposit in the United States mail, postage prepaid, addressed to you
at the last address you provided to the Company.

         12. TRANSFERABILITY. This Option shall not be transferable in any
manner (including without limitation, sale, alienation, anticipation, pledge,
encumbrance, or assignment) other than, (i) by will or by the laws of descent
and distribution, (ii) by written designation of a beneficiary, in a form
acceptable to the Company, with such designation taking effect upon the death of
the Optionee, (iii) by delivering written notice to the Company, in a form
acceptable to the Company (including such representations, warranties and
indemnifications as the Company shall require the Optionee to make to protect
the Company's interests and ensure that this Option has been transferred under
the circumstances approved by the Company), by gift to the Optionee's spouse,
former spouse, children, stepchildren, grandchildren, parent, stepparent,
grandparent, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, persons having one of the
foregoing types of relationship with the Optionee due to adoption, any person
sharing the Optionee's household (other than a tenant or employee), a foundation
in which these persons or the Optionee control the management of assets, and any
other entity in which these persons (or the Optionee) own more than fifty
percent of the voting interests. A transfer to an entity in which more than
fifty percent of the voting interests are owned by these persons (or the
Optionee) in exchange for an interest in that entity is specifically included as
a permissible type of transfer. In addition, a transfer to a trust created
solely for the benefit (i.e., the Optionee and/or any or all of the foregoing
persons hold more than 50 percent of the beneficial interest in the trust) of
the Optionee and/or any or all of the foregoing persons is also a permissible
transferee, or (iv) such other transferees as may be authorized by the Board in
its sole and absolute discretion. During the Optionee's life this Option is
exercisable only by the Optionee or a transferee satisfying the above
conditions. Except in the event of the Optionee's death, upon transfer of this
Option to any or all of the foregoing persons, the Optionee is liable for any
and all taxes due upon exercise of this transferred Option. At no time will a
transferee who is considered an affiliate under Rule 144(a)(1) be able to sell
any or all such Stock without complying with Rule 144. The right of a transferee
to exercise the transferred portion of this Option shall terminate in accordance
with the Optionee's right of exercise under this Option and is further subject
to such representations, warranties and indemnifications from the transferee
that the Company requires the transferee to make to protect the Company's
interests and ensure that this Option has been transferred under the
circumstances approved by the Company. Once a portion of this Option is
transferred, no further transfer may be made of that portion of this Option.


                                      -10-
<PAGE>

         13. ARBITRATION. Any dispute or claim concerning the Option, the Grant
Notice or this Agreement shall be fully, finally and exclusively resolved by
binding arbitration conducted by the American Arbitration Association pursuant
to the commercial arbitration rules in San Diego, California. By accepting the
Option, the Optionee and the Company waive their respective rights to have any
such disputes or claims tried by a judge or jury.

         14. AMENDMENT. The Board may amend your Option at any time, provided no
such amendment may adversely affect the Option or any unexercised portion of
your Option, without your consent unless such amendment is necessary to comply
with any applicable law or government regulation. No amendment or addition to
this Agreement shall be effective unless in writing or, in such electronic form
as may be designated by the Company.


                                      -11-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.32
<SEQUENCE>7
<FILENAME>atc_10kex10-32.txt
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.32


                                RELEASE AGREEMENT


I, BRUCE EHLERS, understand that my position with American Technology
Corporation (the "Company") will be terminated effective 09/09/2004 (the
"Separation Date"). The Company has agreed that in exchange for my signature on
this Agreement and the promises and covenants herein, the Company will pay me
severance in the amount of one (1) month of base salary minus the standard
withholdings and deductions. This payment will be made within three (3) business
days of the date I submit this signed Agreement to the Company. I understand
that I am not entitled to this severance payment unless I sign this Agreement. I
understand that in addition to this severance the Company has paid me all of my
accrued salary and vacation, to which I am entitled by law.

In exchange for the consideration provided to me by this Agreement that I am not
otherwise entitled to receive, I hereby unconditionally and completely release
the Company and its directors, officers, employees, shareholders, partners,
agents, attorneys, predecessors, successors, parent and subsidiary entities,
insurers, affiliates, and assigns from any and all claims, liabilities and
obligations, both known and unknown, that arise out of or are in any way related
to events, acts, conduct, or omissions occurring prior to my signing this
Agreement. This general release includes, but is not limited to: (1) all claims
arising out of or in any way related to my employment with the Company or the
termination of that employment; (2) all claims related to my compensation or
benefits from the Company, including salary, bonuses, commissions, vacation pay,
expense reimbursements, severance pay, fringe benefits, stock, stock options, or
any other ownership interests in the Company; (3) all claims for breach of
contract, wrongful termination, and breach of the implied covenant of good faith
and fair dealing; (4) all tort claims, including claims for fraud, defamation,
emotional distress, and discharge in violation of public policy; and (5) all
federal, state, and local statutory claims, including claims for discrimination,
harassment, retaliation, attorneys' fees, or other claims arising under the
federal Civil Rights Act of 1964 (as amended), the federal Americans with
Disabilities Act of 1990, the federal Age Discrimination in Employment Act of
1967 (as amended) ("ADEA"), and the California Fair Employment and Housing Act
(as amended).

In giving this release, which includes claims which may be unknown to me at
present, I hereby acknowledge that I have read and understand Section 1542 of
the Civil Code of the State of California which reads as follows:

         A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
         KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
         RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
         SETTLEMENT WITH THE DEBTOR.

I hereby expressly waive and relinquish all rights and benefits under Section
1542 and any law or legal principle of similar effect in any jurisdiction with
respect to claims released hereby.


                                      -1-
<PAGE>

I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under the federal Age Discrimination in Employment Act of
1967, as amended ("ADEA"). I also acknowledge that the consideration given for
the waiver in the above paragraph is in addition to anything of value to which I
was already entitled. I have been advised by this writing, as required by the
ADEA that: (a) my waiver and release do not apply to any claims that may arise
after my signing of this Agreement; (b) I should consult with an attorney prior
to executing this release; (c) I have twenty-one (21) days within which to
consider this release (although I may choose to voluntarily execute this release
earlier); (d) I have seven (7) days following the execution of this release to
revoke the Agreement; and (e) this Agreement will not be effective until the
eighth day after this Agreement has been signed both by me and by the Company
("Effective Date").

I acknowledge my continuing obligations under my Employee Nondisclosure and
Invention Assignment Agreement (attached Exhibit A). Pursuant to the Employee
Nondisclosure and Invention Assignment Agreement I understand that among other
things, I must not use or disclose any confidential or proprietary information
of the Company and I must immediately return all Company property and documents
(including all embodiments of proprietary information) and all copies thereof in
my possession or control.

This Agreement including Exhibit A hereto constitutes the complete, final and
exclusive embodiment of the entire agreement between the Company and me with
regard to the subject matter hereof. I am not relying on any promise or
representation by the Company that is not expressly stated herein. This
Agreement may only be modified by a writing signed by both me and a duly
authorized officer of the Company.

I accept and agree to the terms and conditions stated above:

   10/14/04                                            /s/ Bruce Ehlers
- -------------------------                     ----------------------------------
   Date                                                  Bruce Ehlers

   10/25/04                                       /s/ Michael A. Russell
- -------------------------                     ----------------------------------
   Date                                       AMERICAN TECHNOLOGY CORPORATION


                                      -2-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.33
<SEQUENCE>8
<FILENAME>atc_10kex10-33.txt
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.33


                         AMERICAN TECHNOLOGY CORPORATION
                              SPECIAL STOCK OPTION

              Granted Under the Approval of the Board of Directors
                       of American Technology Corporation


         THIS SPECIAL STOCK OPTION, dated as of November 13, 2000 (the "Date of
Grant"), is granted by AMERICAN TECHNOLOGY CORPORATION, a Delaware corporation
("Company"), to Elwood G. Norris (the "Optionee"), whose status with the Company
is described on the signature page hereof below his signature.

         WHEREAS, the Optionee is now a Director of the Company and the Company
desires to have the Optionee remain in its service and desires to encourage
stock ownership by the Optionee and to increase the Optionee's proprietary
interest in the Company's success; and as an inducement thereto has determined
to grant to the Optionee the option herein provided for, to the end that the
Optionee may thereby be assisted in obtaining an interest, or an increased
interest, as the case may be, in the stock ownership of the Company;

         NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereto hereby agree as follows.

                  1. GRANT. The Company hereby grants to the Optionee an option
(the "Option") to purchase 25,000 shares of the Company's common stock, $.00001
par value per share (the "Option Shares") at the price of $3.62 per share (the
"Purchase Price" or "Exercise Price") and vesting per the following schedule:
All option shares shall vest immediately. This Option is granted separately at
the discretion of the Board of Directors and is not an option pursuant to the
Company's 1992 or 1997 option plans. No partial vesting of this Stock Option
will be allowed. Both the Purchase Price and the number of Option Shares
purchasable may be adjusted pursuant to Paragraph 9 hereof.

                  2. TERM. This Option is exercisable during the period
beginning with the Date of Grant and ending November 13, 2005, at 5:00 p.m.
(Pacific Time), except as provided in Paragraph 7 hereof.

                  3. EXERCISE OF OPTION. During the Optionee's life, this Option
may only be exercised by him or her. This Option may only be exercised by
presentation at the principal offices of the Company in San Diego, California of
written notice to the Company's Secretary advising the Company of the Optionee's
election to purchase Option Shares, specifying the number of Option Shares being
purchased, accompanied by payment. No Option Shares shall be issued until full
payment is made therefor. Payment shall be made in cash, represented by bank or
cashier's check, certified check or money order.

                  4. ISSUANCE OF OPTION SHARES; RESTRICTIVE LEGEND.

                           (a) Upon proper exercise of this Option, the Company
shall mail or deliver to the Optionee, as promptly as practicable, a stock
certificate or certificates representing the Option Shares purchased, subject to
clause (b) below. The Company shall not be required to sell or issue any shares
under the Option if the issuance of such shares shall constitute a violation of
any applicable law or regulation or of any requirements of any national
securities exchange upon which the Company's common stock may be listed.


                                      -1-
<PAGE>

                           (b) Upon any exercise of this Option, if a
registration statement under the Securities Act of 1933 (the "Act") is not in
effect with respect to the Option Shares, then the Company shall not be required
to issue any Option Shares unless the Company has received evidence reasonably
satisfactory to it to the effect that the Optionee is acquiring such shares for
investment and not with a view to the distribution thereof. Any reasonable
determination in this connection by the Company shall be final, binding and
conclusive.

                           (c) Unless and until removed as provided below, each
certificate evidencing unregistered Option Shares shall bear a legend in
substantially the following form:

                  "The shares of stock represented by this certificate have not
                  been registered under the Securities Act of 1933 or under the
                  securities laws of any state and may not be sold or
                  transferred except upon such registration or upon receipt by
                  this Corporation of an opinion or counsel satisfactory to this
                  Corporation, in form and substance satisfactory to this
                  Corporation, that registration is not required for such sate
                  or transfer."

                           The Company shall issue a new certificate which does
not contain such legend if (i) the shares represented by such certificate are
sold pursuant to a registration statement (including a current prospectus) which
has become effective under the Act, or (ii) the staff of the Securities and
Exchange Commission shall have issued a "no action" letter, reasonably
satisfactory to the Company's counsel, to the effect that such shares may be
freely sold and thereafter traded publicly without registration under the Act,
or (iii) the Company's counsel, or other counsel acceptable to the Company,
shall have rendered an opinion satisfactory to the Company to the effect that
such shares may be freely sold and thereafter publicly traded without
registration under the Act. The Company may, but shall in no event be obligated
to, register any securities covered hereby pursuant to the Act. The Company
shall not be obligated to take any other affirmative action in order to cause
the exercise of the Option or the issuance of any Option Shares to comply with
any law or regulation of any governmental authority.

                  5. TRANSFER OF OPTION SHARES. Option Shares issued upon
exercise of this Option which have not been registered under the Act shall be
transferable by a holder thereof only upon compliance with the conditions in
this Paragraph. Before making any transfer of Option Shares, the holder of the
shares shall give written notice to the Company of the holder's intention to
make the transfer, describing the manner and circumstances of the transfer. If
in the opinion of the Company's counsel, or of other counsel acceptable to the
Company, the proposed transfer may be effected without registration under the
Act, the Company shall so notify the holder and the holder shall be entitled to
transfer such shares as described in the holder's notice to the Company. If such
counsel opines that the transfer may not be made without registration under the
Act, then the Company shall so notify the holder, in which event the holder
shall not be entitled to transfer the shares until (i) the Company notifies the
holder that it is permissible to proceed with the transfer, or (ii) registration
of the shares under the Act has become effective. The Company may issue "stop
transfer" instructions to its transfer agent with respect to any or all of the
Option Shares as it deems necessary to prevent any violation of the Act.


                                      -2-
<PAGE>

                  6. TRANSFER OR ENCUMBRANCE OF THIS OPTION PROHIBITED. This
Option may not be transferred or assigned in any manner by the Optionee, except
by will or trust upon the Optionee's death or by operation of law under the laws
of descent and distribution. The same restriction on transfer or assignment
shall apply to any heirs, devisees, beneficiaries or other persons acquiring
this Option or an interest herein under such an instrument or by operation of
law. Further, this Option may not be pledged, hypothecated or otherwise
encumbered, by operation of law or otherwise, nor shall it be subject to
execution, attachment or similar process.

                  7. TERMINATION OF SERVICE, DEATH, OR DISABILITY. (a) Except as
may be otherwise expressly provided in this Agreement, this Option shall
terminate as follows:

                           (i) Upon termination of the Optionee's employment
with the Company for cause;

                           (ii) At the expiration of six (6) months from the
date of the Optionee's resignation or termination of the Optionee's employment
with the Company without cause, for any reason other than death; provided, that
if the Optionee dies within such six-month period, subclause (iii) below shall
apply; or

                           (iii) At the expiration of fifteen (15) months after
the date of death of the Optionee.

                           (b) This Option confers no right upon the Optionee
with respect to the continuation of his employment (or his position as an
officer, director or other provider of services) with the Company or any parent
or subsidiary of the Company, and shall not interfere with the right of the
Company, or any parent or subsidiary Company, to terminate such relationship(s)
at any time in accordance with law and any agreements then in force.

                  8. NO RIGHTS AS STOCKHOLDER. The Optionee shall have no rights
as a stockholder with respect to Option Shares until the date of issuance of a
stock certificate for such shares. No adjustment for dividends, or otherwise,
except as provided in Paragraph 9, shall be made if the record date therefor is
prior to the date of exercise of such Option.

                  9. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence
of this Option shall not limit or affect in any way the right or power of the
Company or its shareholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issue of bonds, debentures, preferred or prior preference stock ahead of or
affecting the Option Shares or the rights thereof, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise. However,

                           (a) If, prior to the Company's delivery of all the
Option Shares subject to this Option, the Company shall effect a subdivision
(split), or combination (reverse split) of shares or other capital readjustment,
the payment of a common stock dividend, or other increase or reduction of the
number of shares of common stock outstanding, without receiving compensation
therefor in money, services or property, then (i) in the event of an increase in
the number of such shares outstanding, the Purchase Price shall be


                                      -3-
<PAGE>

proportionately reduced and the number of Option Shares then still purchasable
shall be proportionately increased; and (ii) in the event of a reduction in the
number of such shares outstanding, the Purchase Price payable per share shall be
proportionately increased and the number of Option Shares then still purchasable
shall be proportionately reduced.

                           (b) If while this Option remains outstanding the
Company is reorganized, merged, consolidated or party to a plan of share
exchange with another corporation, or if the Company sells or otherwise disposes
of all or substantially all its property or assets to another corporation, then
subject to the provisions of clause (ii) below, (i) after the effective date of
such reorganization, merger, consolidation, exchange or sale, as the case may
be, the Optionee shall be entitled, upon exercise of this Option, to receive, in
lieu of the Option Shares, the number and class of shares of such stock, other
securities, cash and other property or rights as the holders of shares of the
Company's common stock received pursuant to the terms of the reorganization,
merger, consolidation, exchange or sale and to which he would have been entitled
if, immediately prior to such reorganization, merger, consolidation, exchange or
sale, he had been the holder of record of a number of shares of common stock
equal to the number of Option Shares as to which this Option shall be so
exercised; and (ii) this Option may be canceled by the Board of Directors of the
Company as of the effective date of any such reorganization, merger,
consolidation, exchange or sale; provided that (x) such reorganization, merger,
consolidation, exchange or sale results in a change in control of the Company
rather than a mere change of form or domicile of the Company, (y) written notice
of such cancellation is given to the Optionee or other holder of this Option not
less than 45 days prior to such effective date, and (z) the Options or other
holder shall have the right to exercise the Option in full during such 45-day
period preceding the effective date of such reorganization, merger,
consolidation, exchange or sale.

                           (c) In case the Company shall determine to offer to
the holders of its common stock rights to subscribe pro rata for any new or
additional shares of common stock, or any securities convertible into common
stock, then the Optionee shall be entitled to participate in such pro rata
offering in the same manner and to the same extent as if this Option had been
exercised at the Purchase Price then in effect and the number of Option Shares
then purchasable upon exercise hereof had been issued to the Optionee pursuant
to the terms hereof.

                           (d) Except as herein before expressly provided, the
issue by the Company of shares of stock of any class, or securities convertible
into shares of stock of any class, for cash or property, or for labor or
services either upon direct sale or upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the Purchase Price
or the number of Option Shares then subject to this Option.

                  10. NOTIFICATION TO COMPANY OF CERTAIN SALES. The Optionee or
other holder of Option Shares who sells any of such shares shall notify the
Company of such fact in writing within 30 days after the date of sale, if:


                                      -4-
<PAGE>

                           (a) At the time the Option Shares were sold, less
than ONE year had elapsed since the date the Option Shares were purchased by the
Optionee, and less than TWO years had elapsed since the Date of Grant of this
Option; or

                           (b) the Optionee was not an employee of the Company
(or of a parent or subsidiary thereof) at all times during the period beginning
on the Date of Grant of this Option and ending on the date three (3) months
prior to the date this Option was exercised to purchase the Option Shares sold.

                  The failure of the Optionee or other holder of Option Shares
to promptly give such notice to the Company shall entitle the Company to cancel
this Option forthwith, without prior notice to the holder hereof.

                  11. NOTICES, ETC. Any notice hereunder by the Optionee shall
be given to the Company in writing, and such notice and any payment by the
Optionee hereunder shall be deemed duly given or made only upon receipt thereof
at the Company's office at 13114 Evening Creek Drive South, San Diego,
California 92128, or at such other address as the Company may designate by
notice to the Optionee. Any notice or other communication to the Optionee
hereunder shall be in writing and shall be deemed duly given or made if mailed
or delivered to the Optionee at the last address as the Optionee may have on
file with the Company's Secretary. This Option shall be governed under and
construed in accordance with the laws of the State of California. This address
shall be binding on the Company and the Optionee and all successors, assigns,
heirs, devisees and personal representatives thereof.

                  NOTE: This option must match the Control copy maintained by
the Company, in all particulars.

                  IN WITNESS WHEREOF, the parties hereto have executed this
Special Stock Option as of the day and year first above written.

                                           AMERICAN TECHNOLOGY CORPORATION
                                           By: /S/ TERRY CONRAD
                                               -----------------------
                                               Terry Conrad, President
ATTEST:
By: /S/ RENEE WARDEN
    -----------------------
    Renee Warden, Secretary
                                      OPTIONEE NAME and STATUS;
                                      Elwood G. Norris, Chairman and CEO
                                      ORIGINAL to Optionee/COPY to Company



                                      -5-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.34
<SEQUENCE>9
<FILENAME>atc_10kex10-34.txt
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.34


                         AMERICAN TECHNOLOGY CORPORATION

                              SPECIAL STOCK OPTION

  Granted Under the Approval of the Board of Directors of American Technology
                                  Corporation


         THIS SPECIAL STOCK OPTION, dated as of November 13, 2000 (the "Date of
Grant"), is granted by AMERICAN TECHNOLOGY CORPORATION, a Delaware corporation
("Company"), to David Carter (the "Optionee"), whose status with the Company is
described on the signature page hereof below his signature.

         WHEREAS, the Optionee is now a Director of the Company and the Company
desires to have the Optionee remain in its service and desires to encourage
stock ownership by the Optionee and to increase the Optionee's proprietary
interest in the Company's success; and as an inducement thereto has determined
to grant to the Optionee the option herein provided for, to the end that the
Optionee may thereby be assisted in obtaining an interest, or an increased
interest, as the case may be, in the stock ownership of the Company;

         NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereto hereby agree as follows.

         1. GRANT. The Company hereby grants to the Optionee an option (the
"Option") to purchase 5,000 shares of the Company's common stock, $.00001 par
value per share (the "Option Shares") at the price of $3.62 per share (the
"Purchase Price" or "Exercise Price") and vesting per the following schedule:
All option shares shall vest immediately. This Option is granted separately at
the discretion of the Board of Directors and is not an option pursuant to the
Company's 1992 or 1997 option plans. No partial vesting of this Stock Option
will be allowed. Both the Purchase Price and the number of Option Shares
purchasable may be adjusted pursuant to Paragraph 9 hereof.

         2. TERM. This Option is exercisable during the period beginning with
the Date of Grant and ending November 13, 2005, at 5:00 p.m. (Pacific Time),
except as provided in Paragraph 7 hereof.

         3. EXERCISE OF OPTION. During the Optionee's life, this Option may only
be exercised by him or her. This Option may only be exercised by presentation at
the principal offices of the Company in San Diego, California of written notice
to the Company's Secretary advising the Company of the Optionee's election to
purchase Option Shares, specifying the number of Option Shares being purchased,
accompanied by payment. No Option Shares shall be issued until full payment is
made therefor. Payment shall be made in cash, represented by bank or cashier's
check, certified check or money order.

         4. ISSUANCE OF OPTION SHARES; RESTRICTIVE LEGEND.

                  (a) Upon proper exercise of this Option, the Company shall
mail or deliver to the Optionee, as promptly as practicable, a stock certificate
or certificates representing the Option Shares purchased, subject to clause (b)
below. The Company shall not be required to sell or issue any shares under the
Option if the issuance of such shares shall constitute a violation of any
applicable law or regulation or of any requirements of any national securities
exchange upon which the Company's common stock may be listed.


                                      -1-
<PAGE>

                  (b) Upon any exercise of this Option, if a registration
statement under the Securities Act of 1933 (the "Act") is not in effect with
respect to the Option Shares, then the Company shall not be required to issue
any Option Shares unless the Company has received evidence reasonably
satisfactory to it to the effect that the Optionee is acquiring such shares for
investment and not with a view to the distribution thereof. Any reasonable
determination in this connection by the Company shall be final, binding and
conclusive.

                  (c) Unless and until removed as provided below, each
certificate evidencing unregistered Option Shares shall bear a legend in
substantially the following form:

                  "The shares of stock represented by this certificate have not
                  been registered under the Securities Act of 1933 or under the
                  securities laws of any state and may not be sold or
                  transferred except upon such registration or upon receipt by
                  this Corporation of an opinion or counsel satisfactory to this
                  Corporation, in form and substance satisfactory to this
                  Corporation, that registration is not required for such sate
                  or transfer."

                  The Company shall issue a new certificate which does not
contain such legend if (i) the shares represented by such certificate are sold
pursuant to a registration statement (including a current prospectus) which has
become effective under the Act, or (ii) the staff of the Securities and Exchange
Commission shall have issued a "no action" letter, reasonably satisfactory to
the Company's counsel, to the effect that such shares may be freely sold and
thereafter traded publicly without registration under the Act, or (iii) the
Company's counsel, or other counsel acceptable to the Company, shall have
rendered an opinion satisfactory to the Company to the effect that such shares
may be freely sold and thereafter publicly traded without registration under the
Act. The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Act. The Company shall not be
obligated to take any other affirmative action in order to cause the exercise of
the Option or the issuance of any Option Shares to comply with any law or
regulation of any governmental authority.

         5. TRANSFER OF OPTION SHARES. Option Shares issued upon exercise of
this Option which have not been registered under the Act shall be transferable
by a holder thereof only upon compliance with the conditions in this Paragraph.
Before making any transfer of Option Shares, the holder of the shares shall give
written notice to the Company of the holder's intention to make the transfer,
describing the manner and circumstances of the transfer. If in the opinion of
the Company's counsel, or of other counsel acceptable to the Company, the
proposed transfer may be effected without registration under the Act, the
Company shall so notify the holder and the holder shall be entitled to transfer
such shares as described in the holder's notice to the Company. If such counsel
opines that the transfer may not be made without registration under the Act,
then the Company shall so notify the holder, in which event the holder shall not
be entitled to transfer the shares until (i) the Company notifies the holder
that it is permissible to proceed with the transfer, or (ii) registration of the
shares under the Act has become effective. The Company may issue "stop transfer"
instructions to its transfer agent with respect to any or all of the Option
Shares as it deems necessary to prevent any violation of the Act.


                                      -2-
<PAGE>

         6. TRANSFER OR ENCUMBRANCE OF THIS OPTION PROHIBITED. This Option may
not be transferred or assigned in any manner by the Optionee, except by will or
trust upon the Optionee's death or by operation of law under the laws of descent
and distribution. The same restriction on transfer or assignment shall apply to
any heirs, devisees, beneficiaries or other persons acquiring this Option or an
interest herein under such an instrument or by operation of law. Further, this
Option may not be pledged, hypothecated or otherwise encumbered, by operation of
law or otherwise, nor shall it be subject to execution, attachment or similar
process.

         7. TERMINATION OF SERVICE, DEATH, OR DISABILITY. (a) Except as may be
otherwise expressly provided in this Agreement, this Option shall terminate as
follows:

                  (i) Upon termination of the Optionee's employment with the
Company for cause;

                  (ii) At the expiration of six (6) months from the date of the
Optionee's resignation or termination of the Optionee's employment with the
Company without cause, for any reason other than death; provided, that if the
Optionee dies within such six-month period, subclause (iii) below shall apply;
or

                  (iii) At the expiration of fifteen (15) months after the date
of death of the Optionee.

                  (b) This Option confers no right upon the Optionee with
respect to the continuation of his employment (or his position as an officer,
director or other provider of services) with the Company or any parent or
subsidiary of the Company, and shall not interfere with the right of the
Company, or any parent or subsidiary Company, to terminate such relationship(s)
at any time in accordance with law and any agreements then in force.

         8. NO RIGHTS AS STOCKHOLDER. The Optionee shall have no rights as a
stockholder with respect to Option Shares until the date of issuance of a stock
certificate for such shares. No adjustment for dividends, or otherwise, except
as provided in Paragraph 9, shall be made if the record date therefor is prior
to the date of exercise of such Option.

         9. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of this
Option shall not limit or affect in any way the right or power of the Company or
its shareholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issue of bonds,
debentures, preferred or prior preference stock ahead of or affecting the Option
Shares or the rights thereof, or the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or otherwise.
However,

                  (a) If, prior to the Company's delivery of all the Option
Shares subject to this Option, the Company shall effect a subdivision (split),
or combination (reverse split) of shares or other capital readjustment, the
payment of a common stock dividend, or other increase or reduction of the number
of shares of common stock outstanding, without receiving compensation therefor
in money, services or property, then (i) in the event of an increase in the
number of such shares outstanding, the Purchase Price shall be


                                      -3-
<PAGE>

proportionately reduced and the number of Option Shares then still purchasable
shall be proportionately increased; and (ii) in the event of a reduction in the
number of such shares outstanding, the Purchase Price payable per share shall be
proportionately increased and the number of Option Shares then still purchasable
shall be proportionately reduced.

                  (b) If while this Option remains outstanding the Company is
reorganized, merged, consolidated or party to a plan of share exchange with
another corporation, or if the Company sells or otherwise disposes of all or
substantially all its property or assets to another corporation, then subject to
the provisions of clause (ii) below, (i) after the effective date of such
reorganization, merger, consolidation, exchange or sale, as the case may be, the
Optionee shall be entitled, upon exercise of this Option, to receive, in lieu of
the Option Shares, the number and class of shares of such stock, other
securities, cash and other property or rights as the holders of shares of the
Company's common stock received pursuant to the terms of the reorganization,
merger, consolidation, exchange or sale and to which he would have been entitled
if, immediately prior to such reorganization, merger, consolidation, exchange or
sale, he had been the holder of record of a number of shares of common stock
equal to the number of Option Shares as to which this Option shall be so
exercised; and (ii) this Option may be canceled by the Board of Directors of the
Company as of the effective date of any such reorganization, merger,
consolidation, exchange or sale; provided that (x) such reorganization, merger,
consolidation, exchange or sale results in a change in control of the Company
rather than a mere change of form or domicile of the Company, (y) written notice
of such cancellation is given to the Optionee or other holder of this Option not
less than 45 days prior to such effective date, and (z) the Options or other
holder shall have the right to exercise the Option in full during such 45-day
period preceding the effective date of such reorganization, merger,
consolidation, exchange or sale.

                  (c) In case the Company shall determine to offer to the
holders of its common stock rights to subscribe pro rata for any new or
additional shares of common stock, or any securities convertible into common
stock, then the Optionee shall be entitled to participate in such pro rata
offering in the same manner and to the same extent as if this Option had been
exercised at the Purchase Price then in effect and the number of Option Shares
then purchasable upon exercise hereof had been issued to the Optionee pursuant
to the terms hereof.

                  (d) Except as herein before expressly provided, the issue by
the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, for cash or property, or for labor or services
either upon direct sale or upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Company convertible
into such shares or other securities, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the Purchase Price or the number
of Option Shares then subject to this Option.

         10. NOTIFICATION TO COMPANY OF CERTAIN SALES. The Optionee or other
holder of Option Shares who sells any of such shares shall notify the Company of
such fact in writing within 30 days after the date of sale, if:


                                      -4-
<PAGE>

                  (a) At the time the Option Shares were sold, less than ONE
year had elapsed since the date the Option Shares were purchased by the
Optionee, and less than TWO years had elapsed since the Date of Grant of this
Option; or

                  (b) the Optionee was not an employee of the Company (or of a
parent or subsidiary thereof) at all times during the period beginning on the
Date of Grant of this Option and ending on the date three (3) months prior to
the date this Option was exercised to purchase the Option Shares sold.

                  The failure of the Optionee or other holder of Option Shares
to promptly give such notice to the Company shall entitle the Company to cancel
this Option forthwith, without prior notice to the holder hereof.

         11. NOTICES, ETC. Any notice hereunder by the Optionee shall be given
to the Company in writing, and such notice and any payment by the Optionee
hereunder shall be deemed duly given or made only upon receipt thereof at the
Company's office at 13114 Evening Creek Drive South, San Diego, California
92128, or at such other address as the Company may designate by notice to the
Optionee. Any notice or other communication to the Optionee hereunder shall be
in writing and shall be deemed duly given or made if mailed or delivered to the
Optionee at the last address as the Optionee may have on file with the Company's
Secretary. This Option shall be governed under and construed in accordance with
the laws of the State of California. This address shall be binding on the
Company and the Optionee and all successors, assigns, heirs, devisees and
personal representatives thereof.

         NOTE: This option must match the Control copy maintained by the
Company, in all particulars.

         IN WITNESS WHEREOF, the parties hereto have executed this Special Stock
Option as of the day and year first above written.

                                            AMERICAN TECHNOLOGY CORPORATION

                                            By: /s/ Elwood G. Norris
                                                --------------------------
                                                Elwood G. Norris, Chairman

ATTEST:

By: /s/ Renee Warden
    -----------------------
    Renee Warden, Secretary

                                            OPTIONEE NAME and STATUS;

                                            David Carter, Director

                                            ORIGINAL to Optionee/COPY to Company


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.35
<SEQUENCE>10
<FILENAME>atc_10kex10-35.txt
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.35


                         AMERICAN TECHNOLOGY CORPORATION

                              SPECIAL STOCK OPTION

  Granted Under the Approval of the Board of Directors of American Technology
                                  Corporation


         THIS SPECIAL STOCK OPTION, dated as of November 13, 2000 (the "Date of
Grant"), is granted by AMERICAN TECHNOLOGY CORPORATION, a Delaware corporation
("Company"), to Richard M. Wagner (the "Optionee"), whose status with the
Company is described on the signature page hereof below his signature.

         WHEREAS, the Optionee is now a Director of the Company and the Company
desires to have the Optionee remain in its service and desires to encourage
stock ownership by the Optionee and to increase the Optionee's proprietary
interest in the Company's success; and as an inducement thereto has determined
to grant to the Optionee the option herein provided for, to the end that the
Optionee may thereby be assisted in obtaining an interest, or an increased
interest, as the case may be, in the stock ownership of the Company;

         NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereto hereby agree as follows.

         1. GRANT. The Company hereby grants to the Optionee an option (the
"Option") to purchase 10,000 shares of the Company's common stock, $.00001 par
value per share (the "Option Shares") at the price of $3.62 per share (the
"Purchase Price" or "Exercise Price") and vesting per the following schedule:
All option shares shall vest immediately. This Option is granted separately at
the discretion of the Board of Directors and is not an option pursuant to the
Company's 1992 or 1997 option plans. No partial vesting of this Stock Option
will be allowed. Both the Purchase Price and the number of Option Shares
purchasable may be adjusted pursuant to Paragraph 9 hereof.

         2. TERM. This Option is exercisable during the period beginning with
the Date of Grant and ending November 13, 2005, at 5:00 p.m. (Pacific Time),
except as provided in Paragraph 7 hereof.

         3. EXERCISE OF OPTION. During the Optionee's life, this Option may only
be exercised by him or her. This Option may only be exercised by presentation at
the principal offices of the Company in San Diego, California of written notice
to the Company's Secretary advising the Company of the Optionee's election to
purchase Option Shares, specifying the number of Option Shares being purchased,
accompanied by payment. No Option Shares shall be issued until full payment is
made therefor. Payment shall be made in cash, represented by bank or cashier's
check, certified check or money order.

         4. ISSUANCE OF OPTION SHARES; RESTRICTIVE LEGEND.

                  (a) Upon proper exercise of this Option, the Company shall
mail or deliver to the Optionee, as promptly as practicable, a stock certificate
or certificates representing the Option Shares purchased, subject to clause (b)
below. The Company shall not be required to sell or issue any shares under the
Option if the issuance of such shares shall constitute a violation of any
applicable law or regulation or of any requirements of any national securities
exchange upon which the Company's common stock may be listed.


                                      -1-
<PAGE>

                  (b) Upon any exercise of this Option, if a registration
statement under the Securities Act of 1933 (the "Act") is not in effect with
respect to the Option Shares, then the Company shall not be required to issue
any Option Shares unless the Company has received evidence reasonably
satisfactory to it to the effect that the Optionee is acquiring such shares for
investment and not with a view to the distribution thereof. Any reasonable
determination in this connection by the Company shall be final, binding and
conclusive.

                  (c) Unless and until removed as provided below, each
certificate evidencing unregistered Option Shares shall bear a legend in
substantially the following form:

                  "The shares of stock represented by this certificate have not
                  been registered under the Securities Act of 1933 or under the
                  securities laws of any state and may not be sold or
                  transferred except upon such registration or upon receipt by
                  this Corporation of an opinion or counsel satisfactory to this
                  Corporation, in form and substance satisfactory to this
                  Corporation, that registration is not required for such sate
                  or transfer."

                  The Company shall issue a new certificate which does not
contain such legend if (i) the shares represented by such certificate are sold
pursuant to a registration statement (including a current prospectus) which has
become effective under the Act, or (ii) the staff of the Securities and Exchange
Commission shall have issued a "no action" letter, reasonably satisfactory to
the Company's counsel, to the effect that such shares may be freely sold and
thereafter traded publicly without registration under the Act, or (iii) the
Company's counsel, or other counsel acceptable to the Company, shall have
rendered an opinion satisfactory to the Company to the effect that such shares
may be freely sold and thereafter publicly traded without registration under the
Act. The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Act. The Company shall not be
obligated to take any other affirmative action in order to cause the exercise of
the Option or the issuance of any Option Shares to comply with any law or
regulation of any governmental authority.

         5. TRANSFER OF OPTION SHARES. Option Shares issued upon exercise of
this Option which have not been registered under the Act shall be transferable
by a holder thereof only upon compliance with the conditions in this Paragraph.
Before making any transfer of Option Shares, the holder of the shares shall give
written notice to the Company of the holder's intention to make the transfer,
describing the manner and circumstances of the transfer. If in the opinion of
the Company's counsel, or of other counsel acceptable to the Company, the
proposed transfer may be effected without registration under the Act, the
Company shall so notify the holder and the holder shall be entitled to transfer
such shares as described in the holder's notice to the Company. If such counsel
opines that the transfer may not be made without registration under the Act,
then the Company shall so notify the holder, in which event the holder shall not
be entitled to transfer the shares until (i) the Company notifies the holder
that it is permissible to proceed with the transfer, or (ii) registration of the
shares under the Act has become effective. The Company may issue "stop transfer"
instructions to its transfer agent with respect to any or all of the Option
Shares as it deems necessary to prevent any violation of the Act.


                                      -2-
<PAGE>

         6. TRANSFER OR ENCUMBRANCE OF THIS OPTION PROHIBITED. This Option may
not be transferred or assigned in any manner by the Optionee, except by will or
trust upon the Optionee's death or by operation of law under the laws of descent
and distribution. The same restriction on transfer or assignment shall apply to
any heirs, devisees, beneficiaries or other persons acquiring this Option or an
interest herein under such an instrument or by operation of law. Further, this
Option may not be pledged, hypothecated or otherwise encumbered, by operation of
law or otherwise, nor shall it be subject to execution, attachment or similar
process.

         7. TERMINATION OF SERVICE, DEATH, OR DISABILITY. (a) Except as may be
otherwise expressly provided in this Agreement, this Option shall terminate as
follows:

                  (i) Upon termination of the Optionee's employment with the
Company for cause;

                  (ii) At the expiration of six (6) months from the date of the
Optionee's resignation or termination of the Optionee's employment with the
Company without cause, for any reason other than death; provided, that if the
Optionee dies within such six-month period, subclause (iii) below shall apply;
or

                  (iii) At the expiration of fifteen (15) months after the date
of death of the Optionee.

                  (b) This Option confers no right upon the Optionee with
respect to the continuation of his employment (or his position as an officer,
director or other provider of services) with the Company or any parent or
subsidiary of the Company, and shall not interfere with the right of the
Company, or any parent or subsidiary Company, to terminate such relationship(s)
at any time in accordance with law and any agreements then in force.

         8. NO RIGHTS AS STOCKHOLDER. The Optionee shall have no rights as a
stockholder with respect to Option Shares until the date of issuance of a stock
certificate for such shares. No adjustment for dividends, or otherwise, except
as provided in Paragraph 9, shall be made if the record date therefor is prior
to the date of exercise of such Option.

         9. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of this
Option shall not limit or affect in any way the right or power of the Company or
its shareholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issue of bonds,
debentures, preferred or prior preference stock ahead of or affecting the Option
Shares or the rights thereof, or the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or otherwise.
However,

                  (a) If, prior to the Company's delivery of all the Option
Shares subject to this Option, the Company shall effect a subdivision (split),
or combination (reverse split) of shares or other capital readjustment, the
payment of a common stock dividend, or other increase or reduction of the


                                      -3-
<PAGE>

number of shares of common stock outstanding, without receiving compensation
therefor in money, services or property, then (i) in the event of an increase in
the number of such shares outstanding, the Purchase Price shall be
proportionately reduced and the number of Option Shares then still purchasable
shall be proportionately increased; and (ii) in the event of a reduction in the
number of such shares outstanding, the Purchase Price payable per share shall be
proportionately increased and the number of Option Shares then still purchasable
shall be proportionately reduced.

                  (b) If while this Option remains outstanding the Company is
reorganized, merged, consolidated or party to a plan of share exchange with
another corporation, or if the Company sells or otherwise disposes of all or
substantially all its property or assets to another corporation, then subject to
the provisions of clause (ii) below, (i) after the effective date of such
reorganization, merger, consolidation, exchange or sale, as the case may be, the
Optionee shall be entitled, upon exercise of this Option, to receive, in lieu of
the Option Shares, the number and class of shares of such stock, other
securities, cash and other property or rights as the holders of shares of the
Company's common stock received pursuant to the terms of the reorganization,
merger, consolidation, exchange or sale and to which he would have been entitled
if, immediately prior to such reorganization, merger, consolidation, exchange or
sale, he had been the holder of record of a number of shares of common stock
equal to the number of Option Shares as to which this Option shall be so
exercised; and (ii) this Option may be canceled by the Board of Directors of the
Company as of the effective date of any such reorganization, merger,
consolidation, exchange or sale; provided that (x) such reorganization, merger,
consolidation, exchange or sale results in a change in control of the Company
rather than a mere change of form or domicile of the Company, (y) written notice
of such cancellation is given to the Optionee or other holder of this Option not
less than 45 days prior to such effective date, and (z) the Options or other
holder shall have the right to exercise the Option in full during such 45-day
period preceding the effective date of such reorganization, merger,
consolidation, exchange or sale.

                  (c) In case the Company shall determine to offer to the
holders of its common stock rights to subscribe pro rata for any new or
additional shares of common stock, or any securities convertible into common
stock, then the Optionee shall be entitled to participate in such pro rata
offering in the same manner and to the same extent as if this Option had been
exercised at the Purchase Price then in effect and the number of Option Shares
then purchasable upon exercise hereof had been issued to the Optionee pursuant
to the terms hereof.

                  (d) Except as herein before expressly provided, the issue by
the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, for cash or property, or for labor or services
either upon direct sale or upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Company convertible
into such shares or other securities, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the Purchase Price or the number
of Option Shares then subject to this Option.

         10. NOTIFICATION TO COMPANY OF CERTAIN SALES. The Optionee or other
holder of Option Shares who sells any of such shares shall notify the Company of
such fact in writing within 30 days after the date of sale, if:


                                      -4-
<PAGE>

                  (a) At the time the Option Shares were sold, less than ONE
year had elapsed since the date the Option Shares were purchased by the
Optionee, and less than TWO years had elapsed since the Date of Grant of this
Option; or

                  (b) the Optionee was not an employee of the Company (or of a
parent or subsidiary thereof) at all times during the period beginning on the
Date of Grant of this Option and ending on the date three (3) months prior to
the date this Option was exercised to purchase the Option Shares sold.

                  The failure of the Optionee or other holder of Option Shares
to promptly give such notice to the Company shall entitle the Company to cancel
this Option forthwith, without prior notice to the holder hereof.

         11. NOTICES, ETC. Any notice hereunder by the Optionee shall be given
to the Company in writing, and such notice and any payment by the Optionee
hereunder shall be deemed duly given or made only upon receipt thereof at the
Company's office at 13114 Evening Creek Drive South, San Diego, California
92128, or at such other address as the Company may designate by notice to the
Optionee. Any notice or other communication to the Optionee hereunder shall be
in writing and shall be deemed duly given or made if mailed or delivered to the
Optionee at the last address as the Optionee may have on file with the Company's
Secretary. This Option shall be governed under and construed in accordance with
the laws of the State of California. This address shall be binding on the
Company and the Optionee and all successors, assigns, heirs, devisees and
personal representatives thereof.

         NOTE: This option must match the Control copy maintained by the
Company, in all particulars.

         IN WITNESS WHEREOF, the parties hereto have executed this Special Stock
Option as of the day and year first above written.

                                            AMERICAN TECHNOLOGY CORPORATION

                                            By: /s/ Elwood G. Norris
                                                --------------------------
                                                Elwood G. Norris, Chairman

ATTEST:

By: /s/ Renee Warden
    -----------------------
    Renee Warden, Secretary

                                            OPTIONEE NAME and STATUS;

                                            Richard M. Wagner, Director

                                            ORIGINAL to Optionee/COPY to Company


                                      -5-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.39
<SEQUENCE>11
<FILENAME>atc_10kex10-39.txt
<TEXT>
<PAGE>
                                                                   EXHIBIT 10.39



                               AMERICAN TECHNOLOGY
                                   CORPORATION


                 PROMISSORY NOTE AND WARRANT PURCHASE AGREEMENT

                                DECEMBER 23, 2004


<PAGE>

<TABLE>
                                          AMERICAN TECHNOLOGY CORPORATION

                                   PROMISSORY NOTE AND WARRANT PURCHASE AGREEMENT


                                                 TABLE OF CONTENTS
                                                 -----------------

                                                                                                               PAGE
                                                                                                               ----


<S>                                                                                                              <C>
1.       PURCHASE AND SALE OF NOTES AND WARRANTS..................................................................1

         1.1      Purchase and Sale of Notes......................................................................1

         1.2      Purchase and Sale of Warrant....................................................................1

2.       CLOSING, DELIVERY AND PAYMENT............................................................................2

         2.1      Closing.........................................................................................2

         2.2      Delivery........................................................................................2

         2.3      Subsequent Sales of Securities..................................................................2

3.       REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.................................................3

         3.1      Organization, Good Standing and Qualification...................................................3

         3.2      Subsidiaries....................................................................................3

         3.3      Capitalization; Voting Rights...................................................................3

         3.4      Authorization; Binding Obligations..............................................................4

         3.5      SEC Reports and Filings.........................................................................4

         3.6      Changes.........................................................................................5

         3.7      Title to Properties and Assets; Liens, etc......................................................5

         3.8      Compliance with Other Instruments...............................................................5

         3.9      Litigation......................................................................................5

         3.10     Employees.......................................................................................5

         3.11     Registration Rights.............................................................................6

         3.12     Compliance with Laws; Permits...................................................................6

         3.13     Patents and Trademarks..........................................................................6


                                                        -i-
<PAGE>

                                                 TABLE OF CONTENTS
                                                 -----------------
                                                    (CONTINUED)

                                                                                                               PAGE
                                                                                                               ----

         3.14     Offering Valid..................................................................................7

         3.15     Eligibility for Form S-3........................................................................7

         3.16     Reporting Status................................................................................7

         3.17     NASDAQ SmallCap Market..........................................................................7

4.       REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.........................................................7

         4.1      Requisite Power and Authority...................................................................7

         4.2      Investment Representations......................................................................8

5.       CONDITIONS TO CLOSING...................................................................................11

         5.1      Conditions to Purchasers' Obligations at the Closing...........................................11

         5.2      Conditions to Obligations of the Company.......................................................12

6.       REGISTRATION RIGHTS.....................................................................................13

         6.1      Definitions....................................................................................13

         6.2      Piggyback Registration.........................................................................14

         6.3      Expenses of Registration.......................................................................15

         6.4      Obligations of the Company.....................................................................15

         6.5      Obligations of Holder..........................................................................16

         6.6      Indemnification................................................................................16

         6.7      Assignment of Registration Rights..............................................................18

         6.8      Termination of Registration Rights.............................................................19

         6.9      Amendment of Registration Rights...............................................................19

7.       MISCELLANEOUS...........................................................................................19

         7.1      Governing Law..................................................................................19

         7.2      Survival.......................................................................................19


                                                        -ii-
<PAGE>

                                                 TABLE OF CONTENTS
                                                 -----------------
                                                    (CONTINUED)

                                                                                                               PAGE
                                                                                                               ----

         7.3      Successors and Assigns.........................................................................19

         7.4      Entire Agreement...............................................................................19

         7.5      Severability...................................................................................20

         7.6      Amendment and Waiver...........................................................................20

         7.7      Delays or Omissions............................................................................20

         7.8      Notices........................................................................................20

         7.9      Expenses.......................................................................................20

         7.10     Attorneys' Fees................................................................................21

         7.11     Confidentiality................................................................................21

         7.12     Titles and Subtitles...........................................................................21

         7.13     Counterparts...................................................................................21

         7.14     Broker's Fees..................................................................................21

         7.15     Exculpation Among Purchasers...................................................................21

         7.16     Pronouns.......................................................................................21


                                                       -iii-
</TABLE>
<PAGE>

                                LIST OF EXHIBITS

         Schedule of Purchasers                               Exhibit A

         Form of Promissory Note                              Exhibit B

         Form of Warrant                                      Exhibit C


                                      -iv-
<PAGE>

         THIS PROMISSORY NOTE AND WARRANT PURCHASE AGREEMENT (the "Agreement")
is entered into as of December 23, 2004, by and among American Technology
Corporation, a Delaware corporation (the "Company"), and each of those persons
and entities, severally and not jointly, whose names are set forth on the
Schedule of Purchasers attached hereto as EXHIBIT A (which persons and entities
are hereinafter collectively referred to as "Purchasers" and each individually
as a "Purchaser").

                                    RECITALS

         WHEREAS, the Company intends to sell a minimum aggregate principal
amount of $2 million and a maximum aggregate principal amount of $2.25 million
in unsecured subordinated promissory notes to the Purchasers in the form
attached hereto as EXHIBIT B (the "Notes"), with a minimum principal amount of
$50,000 from each Purchaser (which minimum principal amount may be reduced for a
Purchaser in the Company's sole discretion); and

         WHEREAS, each Purchaser shall be entitled to receive a warrant in the
form attached hereto as EXHIBIT C (each, a "Warrant," collectively, the
"Warrants," and collectively with the Notes, the "Securities") exercisable for a
number of shares of Common Stock of the Company (the "Warrant Shares") such that
for every $100,000 in principal amount purchased under the Notes, the Purchaser
shall be entitled to a warrant exercisable for 7,500 Warrant Shares, prorated
for principal amounts less than $100,000; and

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties agree as follows:

         1. PURCHASE AND SALE OF NOTES AND WARRANTS.

                  1.1 PURCHASE AND SALE OF NOTES. Subject to the terms and
conditions of this Agreement and pursuant to the Notes, the Purchasers agree to
purchase at the Closing, and the Company agrees to sell and issue to the
Purchaser at the Closing, Notes in the principal amounts as set forth next to
such Purchaser's name on the Schedule of Purchasers attached hereto as EXHIBIT A
at a price equal to one hundred percent (100%) of the principal amount thereof
(the "Investment").

                  1.2 PURCHASE AND SALE OF WARRANT. Subject to the terms and
conditions of this Agreement, the Purchasers agree to purchase, and the Company
agrees to sell and issue to the Purchasers at the Closing, Warrants to purchase
shares of the Company's Common Stock in the amounts as set forth next to such
Purchaser's name on the Schedule of Purchasers attached hereto as EXHIBIT A.


                                      -1-
<PAGE>

         2. CLOSING, DELIVERY AND PAYMENT.

                  2.1 CLOSING. The closing of the sale and purchase of the
Securities under this Agreement (the "Closing") shall take place at 10:00 a.m.
on the date hereof, at the offices of Sheppard Mullin Richter & Hampton LLP,
12544 High Bluff Drive, Suite 300, San Diego, California 92130, or at such other
time or place as the Company and Purchasers may mutually agree (such date is
hereinafter referred to as the "Closing Date").

                  2.2 DELIVERY.

                           (a) CLOSING DELIVERIES. At the Closing, each
Purchaser shall pay the purchase price for the Securities as set forth next to
such Purchaser's name on the Schedule of Purchasers attached hereto as EXHIBIT A
hereto by delivering immediately available funds in United States Dollars to the
Company's offices. The Company shall deliver to the Purchasers executed Notes
and Warrants in the principal amounts and for the number of shares of common
stock as set forth next to such Purchaser's name on the Schedule of Purchasers
attached hereto as EXHIBIT A.

                           (b) METHOD OF PAYMENT. Payment of the purchase price
for the Securities shall be made by cash, cashier's check, wire transfer, or
other form of immediately available funds:

                           US Bank
                           4180 La Jolla Village Drive
                           Suite 125
                           La Jolla, CA  92037
                           Attn:  Josephine Bennett
                           (858) 597-8867
                           ABA#:  122235821
                           Account Name:  American Technology Corporation
                           Account#:  165600532825

                  2.3 SUBSEQUENT SALES OF SECURITIES. At any time on or before
the 60th day following the Closing, the Company may sell additional Notes and
Warrants, provided that the aggregate principal amount of all Notes sold
hereunder shall not exceed $2.25 million. All such sales shall be made on the
terms and conditions set forth in this Agreement, including, without limitation,
the representations and warranties by such Purchasers as set forth in SECTION 4.
Any additional Notes sold pursuant to this SECTION 2.3 shall be deemed to be
"Notes" for all purposes under this Agreement, any Warrants sold pursuant to
this SECTION 2.3 shall be deemed "Warrants" for all purposes under this
Agreement, and any purchasers thereof shall be deemed to be "Purchasers" for all
purposes under this Agreement.


                                      -2-
<PAGE>

         3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.

         Except as set forth in the SEC Documents (defined in SECTION 3.5 below)
or in the disclosure letter (the "Disclosure Letter") previously delivered to
the Purchasers (if any), the Company hereby represents and warrants to, and
covenants with, each Purchaser as of the date of this Agreement as follows:

                  3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement and the Securities and to issue and sell the Securities and the
Warrant Shares and to carry out the provisions of this Agreement, the Notes and
Warrants and to carry on its business as presently conducted and as presently
proposed to be conducted. The Company is duly qualified and is authorized to do
business and is in good standing as a foreign corporation in all jurisdictions
in which the nature of its activities and of its properties (both owned and
leased) makes such qualification necessary, except for those jurisdictions in
which failure to do so would not have a material adverse effect on the Company
or its business.

                  3.2 SUBSIDIARIES. The Company owns no equity securities of any
other corporation, limited partnership or similar entity. The Company is not a
participant in any joint venture, partnership or similar arrangement.

                  3.3 CAPITALIZATION; VOTING RIGHTS. The authorized capital
stock of the Company consists of: (A) 50,000,000 shares of Common Stock, par
value $.00001 per share, of which, as of December 17, 2004 (the "Reference
Date"), (i) 19,808,819 shares are issued and outstanding, (ii) 1,997,123 shares
are subject to outstanding options, (iii) 96,991 shares are reserved for future
issuance to employees, directors and consultants pursuant to the Company's stock
option plans, (iv) 2,627,802 shares are subject to outstanding warrants, and (v)
3,684,782 shares of Common Stock are reserved for issuance under our committed
equity financing facility (the "Equity Financing Facility") with Kingsbridge
Capital Limited ("Kingsbridge"), no shares of which are outstanding as of the
Reference Date; and (B) 5,000,000 shares of Preferred Stock, par value $.00001
per share, of which (i) 350,000 shares are designated Series A Preferred Stock,
no shares of which are outstanding as of the Reference Date, (ii) 250,000 shares
are designated Series B Preferred Stock, no shares of which are outstanding as
of the Reference Date, (iii) 300,000 shares are designated as Series C Preferred
Stock, no shares of which are outstanding as of the Reference Date, (iv) 235,400
shares are designated Series D Preferred Stock, 50,000 of which are outstanding
as of the Reference Date and (v) 343,250 shares are designated Series E
Preferred Stock, 233,250 of which are issued and outstanding as of the Reference
Date. All issued and outstanding shares of the Company's Common Stock (a) have
been duly authorized and validly issued, and (b) are fully paid and
nonassessable. 168,750 shares of Common Stock have been duly and validly
reserved as Warrant Shares for issuance upon exercise of the Warrants. As of the
Reference Date, other than the shares of capital stock issuable upon exercise or
conversion of the foregoing outstanding options, warrants, convertible
securities and under the Equity Financing Facility, and except as may be granted
pursuant to this Agreement or the Warrants, there are no outstanding options,


                                      -3-
<PAGE>

warrants, rights (including conversion, anti-dilution or preemptive rights and
rights of first refusal), proxy or stockholder agreements, or agreements of any
kind for the purchase or acquisition from the Company of any of its securities.
When issued in compliance with the provisions of this Agreement and the
Certificate of Incorporation, as amended, and the Bylaws, as amended
(collectively, the "Charter"), the Securities and the Warrant Shares will be
validly issued, fully paid and nonassessable, and will be free of any liens or
encumbrances; provided, however, that the Securities and the Warrant Shares may
be subject to restrictions on transfer under state and/or federal securities
laws as set forth herein or as otherwise required by such laws at the time a
transfer is proposed.

                  3.4 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action
on the part of the Company, its officers, directors and stockholders necessary
for the authorization of this Agreement and the Securities, the performance of
all obligations of the Company hereunder and thereunder at the Closing and the
authorization, sale, issuance and delivery of the Securities pursuant hereto and
the Warrant Shares has been taken or will be taken prior to the Closing. The
Agreement, and the Securities, when executed and delivered, will be valid and
binding obligations of the Company enforceable in accordance with their terms,
except (a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights; (b) general principles of equity that restrict the
availability of equitable remedies; and (c) to the extent that the
enforceability of the indemnification provisions in SECTION 6.6 of this
Agreement may be limited by applicable laws. The sale of the Securities and the
subsequent exercise of the Warrants into Warrant Shares are not and will not be
subject to any preemptive rights, anti-dilution or rights of first refusal that
have not been properly waived or complied with.

                  3.5 SEC REPORTS AND FILINGS. The Company has delivered to each
Purchaser, or made available on its website, complete and accurate copies of (i)
the Annual Report on Form 10-K for the fiscal year ended September 30, 2003,
(ii) the amended Annual Report on Form 10-K for the fiscal year ended September
30, 2003, (iii) the Quarterly Reports on Form 10-Q for the quarters ended
December 31, 2003, March 31, 2004, and June 30, 2004, as such reports have been
amended prior to the Closing, each as filed by the Company with the Securities
and Exchange Commission ("SEC"), and (iv) Current Reports on Form 8-K dated
December 17, 2004, November 22, 2004, September 28, 2004, August 5, 2004, June
25, 2004, April 28, 2004, February 20, 2004, February 12, 2004, December 29,
2003, December 10, 2003 and November 6, 2003 (the "SEC Documents"). The SEC
Documents, including the financial statements contained therein, (i) complied
with the requirements of the Securities Act of 1933, as amended (the "Securities
Act") or the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
as the case may be, at and as of the times they were filed (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) in all material respects and (ii) did not at and as of the time
they were filed (or, if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing) contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company has made
all filings with the SEC required under the Securities Act, the Exchange Act and


                                      -4-
<PAGE>

all regulations promulgated thereunder since September 30, 2001, other than
reports on Form 8-K for which the SEC has granted a safe harbor with respect to
the timing of the disclosure of such information.

                  3.6 CHANGES. Since June 30, 2004, there has been no material
adverse change or disruption in the business, operations, prospects or financial
condition of the Company other than as disclosed in the SEC Documents and other
than continued losses from operations in the ordinary course of the Company's
business.

                  3.7 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company
has good and marketable title to its properties and assets, including the
properties and assets reflected in the most recent balance sheet included in the
SEC Documents, and good title to its leasehold estates, in each case subject to
no mortgage, pledge, lien, lease, encumbrance or charge, other than (a) those
resulting from taxes which have not yet become delinquent, (b) minor liens and
encumbrances which do not materially detract from the value of the property
subject thereto or materially impair the operations of the Company, and (c)
those that have otherwise arisen in the ordinary course of business. All
facilities, machinery, equipment, fixtures, vehicles and other properties owned,
leased or used by the Company are in good operating condition and repair and are
reasonably fit and usable for the purposes for which they are being used. The
Company is in compliance with all material terms of each lease to which it is a
party or is otherwise bound.

                  3.8 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default of any term of its Charter, or of any provision of any
mortgage, indenture, contract, agreement, instrument or contract to which it is
party or by which it is bound or of any judgment, decree, order, writ or, to its
knowledge, any statute, rule or regulation applicable to the Company which would
materially and adversely affect the business, assets, liabilities, financial
condition or operations of the Company. The execution, delivery, and performance
of and compliance with this Agreement, and the Securities, and the issuance and
sale of the Securities pursuant hereto and of the Warrant Shares, will not, with
or without the passage of time or giving of notice, result in any such material
violation, or be in conflict with or constitute a default under any such term,
or result in the creation of any mortgage, pledge, lien, encumbrance or charge
upon any of the properties or assets of the Company or the suspension,
revocation, impairment, forfeiture or nonrenewal of any permit license,
authorization or approval applicable to the Company, its business or operations
or any of its assets or properties.

                  3.9 LITIGATION. There is no action, suit, proceeding or
investigation pending or to the Company's knowledge currently threatened in
writing against the Company that questions the validity of this Agreement or the
Securities or the right of the Company to enter into any of such agreements, or
to consummate the transactions contemplated hereby or thereby, or, except as
disclosed in the SEC Documents, which might result, either individually or in
the aggregate, in any material adverse change in the assets, prospects,
condition or affairs of the Company, financially or otherwise, or any change in
the current equity ownership of the Company, nor is the Company aware that there
is any basis for the foregoing.

                  3.10 EMPLOYEES. The Company has no collective bargaining
agreements with any of its employees. There is no labor union organizing
activity pending or, to the Company's knowledge, threatened with respect to the
Company.


                                      -5-
<PAGE>

                  3.11 REGISTRATION RIGHTS. Except as required pursuant to this
Agreement and pursuant to the terms of a Series C Stock and Warrant Purchase
Agreement, a Series D Stock and Warrant Purchase Agreement, a Series E Stock and
Warrant Purchase Agreement, and a Registration Rights Agreement with Kingsbridge
pursuant to the Equity Financing Facility, the Company is presently not under
any obligation, and has not granted any rights, to register (as defined in
SECTION 6.1 of this Agreement) any of the Company's presently outstanding
securities or any of its securities that may hereafter be issued.

                  3.12 COMPLIANCE WITH LAWS; PERMITS. To its knowledge, the
Company is not in violation of any applicable statute, rule, regulation, order
or restriction of any domestic or foreign government or any instrumentality or
agency thereof or any administrative or self-regulatory agency in respect of the
conduct of its business or the ownership of its properties which violation would
materially and adversely affect the business, assets, liabilities, financial
condition or operations of the Company. No orders, permissions, consents,
approvals or authorizations are required to be obtained and no registrations or
declarations are required to be filed in connection with the execution and
delivery of this Agreement and the issuance of the Securities or the Warrant
Shares, except such as has been duly and validly obtained or filed, or with
respect to any filings that must be made after the Closing, as will be filed in
a timely manner. The Company has all franchises, permits, licenses and any
similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects or financial condition of the Company and
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as planned to be conducted.

                  3.13 PATENTS AND TRADEMARKS. To the best of its knowledge, the
Company owns or possesses sufficient legal rights to all patents, trademarks,
service marks, trade names, copyrights, trade secrets, information and other
proprietary rights and processes necessary for its business as now conducted and
as proposed to be conducted, without any known infringement of the rights of
others. There are no outstanding options, licenses or agreements of any kind
relating to the foregoing, except those disclosed in the SEC Documents and those
entered into in the ordinary course of the Company's business. The Company has
not received any communications alleging that the Company has violated or, by
conducting its business as proposed, would violate any of the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity. The Company is not aware that
any of its employees is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with their duties to the Company or that would conflict with the
Company's business as proposed to be conducted. Neither the execution nor
delivery of this Agreement, nor the carrying on of the Company's business by the
employees of the Company, nor the conduct of the Company's business as proposed,
will, to the Company's knowledge, conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any employee is now obligated. The Company
does not believe it is or will be necessary to utilize any inventions, trade
secrets or proprietary information of any of its employees made prior to their
employment by the Company, except for inventions, trade secrets or proprietary
information that have been assigned to the Company.


                                      -6-
<PAGE>

                  3.14 OFFERING VALID. Assuming the accuracy of the
representations and warranties of the Purchasers contained in SECTION 4 hereof,
the offer, sale and issuance of the Securities and the Warrant Shares will be
exempt from the registration requirements of the Securities Act and will have
been registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws. Neither the Company nor any agent on its behalf has
solicited or will solicit any offers to sell or has offered to sell or will
offer to sell all or any part of the Securities to any person or persons so as
to bring the sale of such Securities by the Company within the registration
provisions of the Securities Act or any state securities laws.

                  3.15 ELIGIBILITY FOR FORM S-3. The Company represents and
warrants that it meets the requirements for the use of Form S-3 for registration
of the sale by the Purchasers of the Warrant Shares, and the Company shall file
all reports required to be filed by the Company with the SEC in a timely manner
and take all other necessary action so as to maintain such eligibility for the
use of Form S-3.

                  3.16 REPORTING STATUS. The Company's Common Stock is
registered under Section 12 of the Exchange Act. So long as any Purchaser
beneficially owns any of the Securities or Warrant Shares, the Company shall
timely file all reports required to be filed with the SEC pursuant to the
Exchange Act, and the Company shall not voluntarily terminate its status as an
issuer required to file reports under the Exchange Act even if the Exchange Act
or the rules and regulations thereunder would permit such termination.

                  3.17 NASDAQ SMALLCAP MARKET. The Company's Common Stock is
listed on the Nasdaq SmallCap Market maintained by the National Association of
Securities Dealers, Inc. ("NASD"), and for so long as any Purchaser owns any of
the Warrants or Warrant Shares, the Company shall use its best efforts to
continue the listing and trading of its Common Stock on the Nasdaq SmallCap
Market or to secure and maintain listing and trading on the Nasdaq National
Market System, the New York Stock Exchange or the American Stock Exchange, and
shall comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of such market or exchange. The Company is
not aware of any delisting or suspension proceeding regarding its Common Stock
or any SEC or NASD inquiries regarding the Company and does not reasonably
anticipate any such delisting, suspension or inquiry.

         4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.

         Each Purchaser hereby represents and warrants, severally and not
jointly, to the Company as follows:

                  4.1 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary
power and authority under all applicable provisions of law to execute and
deliver this Agreement and to carry out their provisions. All action on
Purchaser's part required for the lawful execution and delivery of this
Agreement has been or will be effectively taken prior to the Closing. Upon its
execution and delivery, this Agreement will be a valid and binding obligation of
Purchaser, enforceable in accordance with its terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of


                                      -7-
<PAGE>

general application affecting enforcement of creditors' rights, (b) general
principles of equity that restrict the availability of equitable remedies, and
(c) to the extent that the enforceability of the indemnification provisions of
SECTION 6.6 of this Agreement may be limited by applicable laws.

                  4.2 INVESTMENT REPRESENTATIONS. Purchaser understands that
neither the Securities nor the Warrant Shares have been registered under the
Securities Act, and that the instruments representing the Securities and the
Warrant Shares will contain appropriate restrictive legends. Purchaser also
understands that the Securities are being offered and sold pursuant to an
exemption from registration contained in the Securities Act based in part upon
Purchaser's representations contained in the Agreement. Purchaser hereby
represents and warrants as follows:

                           (a) PURCHASER BEARS ECONOMIC RISK. Purchaser has
substantial experience in evaluating and investing in private placement
transactions of securities in companies similar to the Company so that it is
capable of evaluating the merits and risks of its investment in the Company and
has the capacity to protect its own interests. Purchaser must bear the economic
risk of this investment with respect to the Warrant and Warrant Shares
indefinitely unless the Warrant or the Warrant Shares are registered pursuant to
the Securities Act, or an exemption from registration is available. Further,
there is no established market for the Notes, and none is likely to develop.
Purchaser understands that other than pursuant to the terms of this Agreement,
the Company has no present intention of registering the Securities or the
Warrant Shares. Purchaser also understands that there is no assurance that any
exemption from registration under the Securities Act will be available and that,
even if available, such exemption may not allow Purchaser to transfer all or any
portion of the Securities or the Warrant Shares under the circumstances, in the
amounts or at the times Purchaser might propose.

                           (b) ACQUISITION FOR OWN ACCOUNT. Purchaser is
acquiring the Securities and the Warrant Shares for Purchaser's own account for
investment only, and not with a present view towards their distribution other
than in compliance with the Securities Act.

                           (c) PURCHASER CAN PROTECT ITS INTEREST. Purchaser
represents that by reason of its, or of its management's, business or financial
experience, Purchaser has the capacity to protect its own interests in
connection with the transactions contemplated in this Agreement. Further,
Purchaser is aware of no publication of any advertisement in connection with the
transactions contemplated in the Agreement.

                           (d) ACCREDITED INVESTOR. Unless Purchaser has
initialed the blank next to SECTION 4.2(H) below, Purchaser represents that it
is an accredited investor within the meaning of Regulation D under the
Securities Act.

                           (e) COMPANY INFORMATION. Purchaser has received and
read the SEC Documents and has had an opportunity to discuss the Company's
business, management and financial affairs with directors, officers and
management of the Company and has had the opportunity to review the Company's
operations and facilities. Purchaser has also had the opportunity to ask
questions of and receive answers from, the Company and its management regarding
the terms and conditions of this investment.


                                      -8-
<PAGE>

                           (f) RULE 144. Purchaser acknowledges and agrees that
the Securities, and, if issued, the Warrant Shares must be held indefinitely
unless they are subsequently registered under the Securities Act or an exemption
from such registration is available. Purchaser has been advised or is aware of
the provisions of Rule 144 promulgated under the Securities Act as in effect
from time to time, which permits limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things: the availability of certain current public information about the
Company, the resale occurring following the required holding period under Rule
144 and (other than Rule 144(k)) the number of shares being sold during any
three-month period not exceeding specified limitations.

                           (g) RESIDENCE. If the Purchaser is an individual,
then the Purchaser resides in the state or province identified in the address of
the Purchaser set forth on EXHIBIT A; if the Purchaser is a partnership,
corporation, limited liability company or other entity, then the office or
offices of the Purchaser in which its investment decision was made is located at
the address or addresses of the Purchaser set forth on EXHIBIT A.

(Initial if applicable) ____
                           (h) FOREIGN INVESTORS. REGULATION S REPRESENTATIONS.
The representations in this SECTION 4.2(H) apply only to Purchasers who enter
their initials next to this section. Purchaser understands that the Company is
relying on the following representations and warranties, and other
representations and warranties in the SECTION 4, for the purpose of establishing
that the offer and sale of the Securities is excluded from Section 5 of the
Securities Act by virtue of Regulation S.

                                    i. All offers and sales of securities to
Purchaser were made in an offshore transaction, as defined in Rule 902(h) of
Regulation S. Specifically, the offer to sell the Securities was made to
Purchaser who was located outside the United States at the time of such offer,
and this Agreement was executed by Purchaser or a duly authorized representative
of Purchaser located outside the United States at the time of execution.

                                    ii. If Purchaser attempts to sell, transfer
or otherwise dispose of the Securities or the Warrant Shares prior to one year
after the Closing, such Purchaser agrees that:

                                        a. Each "Distributor" (as defined in
Regulation S, Rule 902(d)) in connection with such resale agrees in writing (i)
that all offers and sales of the Securities and the Warrant Shares prior to the
expiration of the Distribution Compliance Period (as defined in Regulation S,
Rule 902(f)) shall be made only in accordance with the provisions of Regulation
S, Rule 903 or Rule 904, pursuant to registration of such securities under the
Securities Act, or pursuant to an available exemption from the registration
requirements of the Securities Act; and (ii) not to engage in hedging
transactions with regard to such securities prior to the expiration of the
Distribution Compliance Period, unless in compliance with the Securities Act.

                                        b. All offering materials and documents
(other than press releases) used in connection with offers and sales of the
Securities and the Warrant Shares prior to the expiration of the Distribution
Compliance Period shall include statements to the effect that such securities


                                      -9-
<PAGE>

have not been registered under the Securities Act and may not be offered or sold
in the United States or to U.S. Persons (as defined in SECTION 4.2(H)(III)),
other than Distributors, unless the securities are registered under the
Securities Act, or an exemption from the registration requirements of the
Securities Act is available. Such offering materials and documents also must
state that hedging transactions involving those securities may not be conducted
unless in compliance with the Securities Act. Such statements shall appear (i)
on the cover or inside cover page of any prospectus or offering circular used in
connection with the offer or sale of the securities; (ii) in the underwriting
section of any prospectus or offering circular used in connection with the offer
or sale of the securities; and (iii) in any advertisement made or issued by the
Company, any Distributor, any of their respective affiliates, or any person
acting on behalf of any of the foregoing. Such statements may appear in summary
form on prospectus cover pages and in advertisements.

                                        c. The offer or sale of the Securities
and the Warrant Shares by such Purchaser shall not be made to a U.S. Person or
for the account of a U.S. Person, other than a Distributor.

                                        d. The offer and sale of the Securities
and the Warrant Shares shall also comply with the following conditions (i) such
Purchaser shall require that prior to the sale or transfer, the purchaser of the
Securities or the Warrant Shares (other than a Distributor) certifies that it is
not a U.S. Person and is not acquiring such securities for the account or
benefit of any U.S. Person or certifies that it is a U.S. Person who purchased
securities in a transaction that did not require registration under the
Securities Act; (ii) such Purchaser shall require that prior to the sale or
transfer, the purchaser of such securities agrees to resell such securities only
in accordance with the provisions of Regulation S, pursuant to registration
under the Securities Act, or pursuant to an available exemption from
registration; and agrees not to engage in hedging transactions with regard to
such securities unless in compliance with the Securities Act; (iii) such
Purchaser shall require each Distributor selling securities to a Distributor, a
dealer (as defined in SECTION 2(12) of the Securities Act), or a person
receiving a selling concession, fee or other remuneration, prior to the
expiration of the Distribution Compliance Period, to send a confirmation or
other notice to the purchaser stating that the purchaser is subject to the same
restrictions on offers and sales that apply to the Distributor.

                                        e. Such Purchaser understands that the
Securities and the Warrant Shares will at all times, prior to the expiration of
the Distribution Compliance Period, contain a legend to the effect that transfer
is prohibited except in accordance with the provisions of Regulation S, pursuant
to registration under the Securities Act, or pursuant to an available exemption
from registration; and that hedging transactions involving these securities may
not be conducted unless in compliance with the Securities Act.

                                        f. Such Purchaser further understands
the Company, to comply with Regulation S, shall refuse to register any transfer
of the Securities or the Warrant Shares not made in accordance with the
provisions of Regulation S, pursuant to registration under the Securities Act,
or pursuant to an available exemption from registration.


                                      -10-
<PAGE>

                                    iii. Such Purchaser is not a U.S. Person and
is not acquiring the Securities for the account or benefit of any U.S. Person.
The term "U.S. Person" means (i) any natural person resident in the United
States; (ii) any partnership or corporation organized or incorporated under the
laws of the United States; (iii) any estate of which any executor or
administrator is a U.S. Person; (iv) any trust of which any trustee is a U.S.
Person; (v) any agency or branch of a foreign entity located in the United
States; (vi) any non-discretionary account or similar account (other than an
estate or trust) held by a dealer or other fiduciary for the benefit or account
of a U.S. Person; (vii) any discretionary account or similar account (other than
an estate or trust) held by a dealer or other fiduciary organized, incorporated,
or (if an individual) resident in the United States; and (viii) any partnership
or corporation if: (1) organized or incorporated under the laws of any foreign
jurisdiction; and (2) formed by a U.S. Person principally for the purpose of
investing in securities not registered under the Securities Act, unless it is
organized or incorporated, and owned, by accredited investors (as defined in
Rule 501(a) under the Securities Act) who are not natural persons, estates or
trusts. Notwithstanding the foregoing definition of "U.S. Person": (a) any
discretionary account or similar account (other than an estate or trust) held
for the benefit or account of a non-U.S. Person by a dealer or other
professional fiduciary organized, incorporated, or (if an individual) resident
in the United States shall not be deemed a U.S. Person; (b) any estate of which
any professional fiduciary acting as executor or administrator is a U.S. Person
shall not be deemed a U.S. Person if: (1) an executor or administrator of the
estate who is not a U.S. Person has sole or shared investment discretion with
respect to the assets of the estate; and (2) the estate is governed by foreign
law; (c) any trust of which any professional fiduciary acting as trustee is a
U.S. Person shall not be deemed a U.S. Person if a trustee who is not a U.S.
Person has sole or shared investment discretion with respect to the trust
assets, and no beneficiary of the trust (and no settlor if the trust is
revocable) is a U.S. Person; (d) an employee benefit plan established and
administered in accordance with the law of a country other than the United
States and customary practices and documentation of such country shall not be
deemed a U.S. Person; (e) any agency or branch of a U.S. Person located outside
the United States shall not be deemed a U.S. Person if: (1) the agency or branch
operates for valid business reasons; and (2) the agency or branch is engaged in
the business of insurance or banking and is subject to substantive insurance or
banking regulation, respectively, in the jurisdiction where located; (f) the
International Monetary Fund, the International Bank for Reconstruction and
Development, the Inter-American Development Bank, the Asian Development Bank,
the African Development Bank, the United Nations, and their agencies, affiliates
and pension plans, and any other similar international organizations, their
agencies, affiliates and pension plans shall not be deemed U.S. Persons.

         5. CONDITIONS TO CLOSING.

                  5.1 CONDITIONS TO PURCHASERS' OBLIGATIONS AT THE CLOSING.
Purchasers' obligations to purchase the Securities at the Closing are subject to
the satisfaction, at or prior to the Closing Date, except for subsection (f)
which may be satisfied by the time period set forth in SECTION 2.3, of the
following conditions:

                           (a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE
OF OBLIGATIONS. The representations and warranties made by the Company in
SECTION 3 hereof shall be true and correct in all material respects as of the
Closing Date with the same force and effect as if they had been made as of the


                                      -11-
<PAGE>

Closing Date, and the Company shall have performed all obligations and
conditions herein required to be performed or observed by it on or prior to the
Closing.

                           (b) LEGAL INVESTMENT. On the Closing Date, the sale
and issuance of the Securities and the proposed issuance of the Warrant Shares
shall be legally permitted by all laws and regulations to which Purchasers and
the Company are subject.

                           (c) CONSENTS, PERMITS, AND WAIVERS. The Company shall
have obtained any and all consents, permits and waivers necessary or appropriate
for consummation of the transactions contemplated by the Agreement (except for
such as may be properly obtained subsequent to the Closing).

                           (d) RESERVATION OF WARRANT SHARES. The Warrant Shares
issuable upon exercise of the Warrants shall have been duly authorized and
reserved for issuance upon such conversion or exercise.

                           (e) NASDAQ SMALLCAP MARKET. The Company's Common
Stock shall be currently trading on the Nasdaq SmallCap Market. The Company and
Purchasers shall not be aware of any delisting or suspension proceeding
regarding the Company's Common Stock or any SEC or NASD inquiries regarding the
Company, nor shall the Company or any Purchaser reasonably anticipate any such
delisting, suspension or inquiry.

                           (f) SIZE OF OFFERING. Purchasers purchasing at least
an aggregate of $2,000,000 in principal amount of the Notes pursuant to this
Agreement shall have purchased, or will be purchasing, such Securities prior to
or concurrent with the Closing.

                  5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to issue and sell the Securities at the Closing is subject to the
satisfaction, at or prior to such Closing Date, of the following conditions:

                           (a) REPRESENTATIONS AND WARRANTIES TRUE. The
representations and warranties made in SECTION 4 hereof by those Purchasers
acquiring Securities shall be true and correct in all material respects at the
Closing Date, with the same force and effect as if they had been made on and as
of said date.

                           (b) PERFORMANCE OF OBLIGATIONS. Such Purchasers shall
have performed and complied with all agreements and conditions herein required
to be performed or complied with by such Purchasers on or before the Closing.

                           (c) CONSENTS, PERMITS, AND WAIVERS. The Company shall
have obtained any and all consents, permits and waivers necessary or appropriate
for consummation of the transactions contemplated by the Agreement (except for
such as may be properly obtained subsequent to the Closing).

                           (d) PAYMENT. Each Purchaser shall have delivered to
the Company immediately available funds of an amount equal to the purchase price


                                      -12-
<PAGE>

of the Securities as set forth next to such Purchaser's name on the Schedule of
Purchasers attached as EXHIBIT A hereto in accordance with SECTION 2.2 hereof.

         6. REGISTRATION RIGHTS.

                  6.1 DEFINITIONS. As used in this SECTION 6, the following
terms shall have the following respective meanings:

                  "FORM S-3" means such form under the Securities Act as in
effect on the date hereof or any successor registration form under the
Securities Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.

                  "HOLDER" means any person owning of record Registrable
Securities that have not been sold to the public or any assignee of record of
such Registrable Securities in accordance with SECTION 6.7 hereof.

                  "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.

                  "REGISTRABLE SECURITIES" means (a) Common Stock of the Company
issued or issuable upon exercise of the Warrants; and (b) any Common Stock of
the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
above-described securities. Notwithstanding the foregoing, Registrable
Securities shall not include (i) any securities held by a registered
broker-dealer, or any securities held by an affiliate or associate of a
broker-dealer who (x) did not purchase the securities in the ordinary course of
business or personal affairs or (y) at the time of purchase of the securities,
had an agreement or understanding, directly or indirectly, with any person to
distribute such securities, (ii) any securities sold by a person to the public
either pursuant to a registration statement or Rule 144 or sold in a private
transaction in which the transferor's rights under this SECTION 6 are not
assigned, or (iii) any securities which are registered for resale under an
effective registration statement.

                  "REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number
of shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and are held by Non-Affiliates (as
defined in Section 7.6(a) below) either (a) are then issued and outstanding or
(b) are issuable pursuant to then exercisable or convertible securities.

                  "REGISTRATION EXPENSES" shall mean all expenses incurred by
the Company in complying with this Section 6 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company which shall
be paid in any event by the Company).


                                      -13-
<PAGE>

                  "SEC" or "COMMISSION" means the Securities and Exchange
Commission.

                  "SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale.

                  "SPECIAL REGISTRATION STATEMENT" shall mean a registration
statement relating to any employee benefit plan or with respect to any corporate
reorganization or other transaction under Rule 145 of the Securities Act and any
registration statement or registration statements that may be used to register
shares of Common Stock that may be issued to Kingsbridge pursuant to the Equity
Financing Facility or upon exercise of their warrant related thereto.

                  6.2 PIGGYBACK REGISTRATION. The Company shall notify all
Holders of Registrable Securities in writing at least ten (10) days prior to the
filing of any registration statement under the Securities Act for purposes of a
public offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding Special Registration Statements) and will afford each
such Holder an opportunity to include in such registration statement all or part
of such Registrable Securities held by such Holder. Each Holder desiring to
include in any such registration statement all or any part of the Registrable
Securities held by it shall, within five (5) days after the above-described
notice from the Company, so notify the Company in writing. Such notice shall
state the intended method of disposition of the Registrable Securities by such
Holder. If a Holder decides not to include all of its Registrable Securities in
any registration statement thereafter filed by the Company, other than a
registration statement for an underwritten offering subject to subsection (a)
below, such Holder shall have no further registration rights for its Registrable
Securities.

                           (a) UNDERWRITING. If the registration statement under
which the Company gives notice under this SECTION 6 is for an underwritten
offering, the Company shall so advise the Holders of Registrable Securities. In
such event, the right of any such Holder to be included in a registration
pursuant to this SECTION 6 shall be conditioned upon such Holder's participation
in such underwriting and the inclusion of such Holder's Registrable Securities
in the underwriting to the extent provided herein. All such Holders proposing to
distribute their Registrable Securities through such underwriting shall enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company. Notwithstanding any
other provision of the Agreement, if the underwriter determines in good faith
that marketing factors require a limitation of the number of shares to be
underwritten, the underwriter may exclude all Registrable Securities from, or
limit the number of Registrable Securities to be included in, the registration
and underwriting. No such reduction shall reduce the securities being offered by
the Company for its own account to be included in the registration and
underwriting. If any Holder disapproves of the terms of any such underwriting,
such Holder may elect to withdraw therefrom by written notice to the Company and
the underwriter, delivered at least ten (10) business days prior to the
effective date of the registration statement. Any Registrable Securities
excluded or withdrawn from such underwriting shall be excluded and withdrawn
from the registration.


                                      -14-
<PAGE>

                           (b) RIGHT TO TERMINATE REGISTRATION. The Company
shall have the right to terminate or withdraw any registration initiated by it
under this SECTION 6 prior to the effectiveness of such registration whether or
not any Holder of Registrable Securities has elected to include securities in
such registration. The Registration Expenses of such withdrawn registration
shall be borne by the Company in accordance with SECTION 6.3 hereof.

                  6.3 EXPENSES OF REGISTRATION. Except as specifically provided
herein, all Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to SECTION 6.2 shall be borne by the
Company. All Selling Expenses incurred in connection with any registrations
hereunder, shall be borne by the holders of the securities so registered pro
rata on the basis of the number of shares so registered.

                  6.4 OBLIGATIONS OF THE COMPANY. Whenever required to effect
the registration of any Registrable Securities, the Company shall:

                           (a) Prepare and file with the SEC a registration
statement on Form S-3, or such other form available to the Company, with respect
to the number of Registrable Securities provided in SECTION 6.2, and thereafter
to use all reasonable efforts to cause each registration statement relating to
Registrable Securities to become effective and keep the registration statement
effective for two years after the Closing Date.

                           (b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement for the period set forth in
paragraph (a) above.

                           (c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.

                           (d) Use its reasonable best efforts to register and
qualify the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders; PROVIDED that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.

                           (e) Notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the happening of
any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing, and use its best efforts to prepare a supplement or amendment to
the registration statement to correct such untrue statement or omission, and
deliver such number of copies of such supplement or amendment to each Holder as
such Holder may reasonably request.


                                      -15-
<PAGE>

                           (f) Use all reasonable efforts to prevent the
issuance of stop orders or any other suspensions in trading of the Company's
Common Stock by the SEC or any applicable exchange or market, and use its best
efforts to have removed or reversed any such stop order or suspension in trading
that occurs.

                  6.5 OBLIGATIONS OF HOLDER.

                           (a) No Holder shall have any right to obtain or seek
an injunction restraining or otherwise delaying any such registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this SECTION 6.

                           (b) It shall be a condition precedent to the
obligations of the Company to take any action pursuant to SECTION 6.2 OR 6.4
that each Holder shall furnish to the Company such information regarding itself,
the Registrable Securities held by it and the intended method of disposition of
the Registrable Securities held by it as shall be reasonably required to effect
the registration of such Registrable Securities and shall execute such documents
in connection with such registration as the Company may reasonably request.

                           (c) Each Holder by such Holder's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
registration statement hereunder, unless such Holder has notified the Company in
writing of such Holder's election to waive all of such Holder's rights to
register any securities under this SECTION 6;

                           (d) Each Holder agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
SECTION 6.4(E), such Holder will immediately discontinue disposition of
Registrable Securities pursuant to the registration statement covering such
Registrable Securities and all other transactions involving or relating to the
Company's securities until such Holder's receipt of copies of a supplemented or
amended prospectus and, if so directed by the Company, such Holder shall deliver
to the Company (at the expense of the Company) or destroy (and deliver to the
Company a certificate of destruction) all copies in such Holder's possession, of
the prospectus covering such Registrable Securities current at the time of
receipt of such notice.

                  6.6 INDEMNIFICATION. In the event any Registrable Securities
are included in a registration statement under this Section 6:

                           (a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, any partner, officer or director of
each Holder, any underwriter (as defined in the Securities Act) for such Holder
and each person, if any, who controls such Holder or underwriter within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,


                                      -16-
<PAGE>

omissions or violations (collectively a "Violation") by the Company: (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law in
connection with the offering covered by such registration statement; and the
Company will pay as incurred to each such Holder, partner, officer, director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; PROVIDED HOWEVER, that the indemnity
agreement contained in this SECTION 6.6 shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company, which consent shall
not be unreasonably withheld, nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, underwriter
or controlling person of such Holder.

                           (b) To the extent permitted by law, each Holder will,
if Registrable Securities held by such Holder are included in the securities as
to which such registration qualifications or compliance is being effected,
indemnify and hold harmless the Company, each of its directors, its officers and
each person, if any, who controls the Company within the meaning of the
Securities Act, any underwriter and any other Holder selling securities under
such registration statement or any of such other Holder's partners, directors or
officers or any person who controls such Holder, against any losses, claims,
damages or liabilities (joint or several) to which the Company or any such
director, officer, controlling person, underwriter or other such Holder, or
partner, director, officer or controlling person of such other Holder may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder under an
instrument duly executed by such Holder and stated to be specifically for use in
connection with such registration; and each such Holder will pay as incurred any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or other Holder, or partner, officer,
director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; PROVIDED, HOWEVER,
that the indemnity agreement contained in this SECTION 6.6 shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; PROVIDED FURTHER, that in no event shall any
indemnity under this SECTION 6.6 exceed the proceeds from the offering received
by such Holder.


                                      -17-
<PAGE>

                           (c) Promptly after receipt by an indemnified party
under this SECTION 6.6 of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this SECTION 6.6,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; PROVIDED, HOWEVER, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this SECTION 6.6, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this SECTION 6.6.

                           (d) If the indemnification provided for in this
SECTION 6.6 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any losses, claims, damages or liabilities
referred to herein, the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall to the extent permitted by applicable law
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the Violation(s) that resulted
in such loss, claim, damage or liability, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by a court of law by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information supplied by
the indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission; PROVIDED, that in no event shall any contribution by
a Holder hereunder exceed the proceeds from the offering received by such
Holder.

                           (e) The obligations of the Company and Holders under
this SECTION 6.6 shall survive completion of any offering of Registrable
Securities in a registration statement and the termination of this agreement. No
indemnifying party, in the defense of any such claim or litigation, shall,
except with the consent of each indemnified party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation.

                  6.7 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this SECTION 6 may be
assigned by a Holder to a transferee or assignee of Registrable Securities which
(a) is a subsidiary, parent, general partner, limited partner, retired partner,
member or retired member of a Holder, (b) is a Holder's family member or trust


                                      -18-
<PAGE>

for the benefit of an individual Holder, or (c) acquires at least fifteen
thousand (15,000) shares of Registrable Securities (as adjusted for stock splits
and combinations); provided, however, (i) the transferor shall, within ten (10)
days after such transfer, furnish to the Company written notice of the name and
address of such transferee or assignee and the securities with respect to which
such registration rights are being assigned and (ii) such transferee shall agree
to be subject to all restrictions set forth in this Agreement.

                  6.8 TERMINATION OF REGISTRATION RIGHTS. All registration
rights granted under this SECTION 6 shall terminate and be of no further force
and effect two (2) years after the Closing Date. In addition, a Holder's
registration rights shall expire if all Registrable Securities held by and
issuable to such Holder (and its affiliates, partners, former partners, members
and former members) may be sold under Rule 144 during any ninety (90) day
period, assuming the use of Net Exercise as provided in the Warrants.

                  6.9 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
SECTION 6 may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Holders
holding at least a majority of the Registrable Securities then outstanding. Any
amendment or waiver effected in accordance with this SECTION 6.9 shall be
binding upon each Holder and the Company. By acceptance of any benefits under
this SECTION 6, Holders of Registrable Securities hereby agree to be bound by
the provisions hereunder.

         7. MISCELLANEOUS.

                  7.1 GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of California as such laws are applied to
agreements between California residents entered into and performed entirely in
California.

                  7.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Purchaser and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.

                  7.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Securities from time to time.

                  7.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and
Schedules hereto, the Disclosure Letter, the Notes and the Warrants and the
other documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and no party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically set
forth herein and therein.


                                      -19-
<PAGE>

         7.5 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

         7.6 AMENDMENT AND WAIVER.

                           (a) This Agreement may be amended or modified only
upon the written consent of the Company, the holders of at least fifty percent
(50%) of the aggregate outstanding principal amount of the Notes held by
Non-Affiliates (as defined below). The term "Non-Affiliates" shall mean persons
who are not at the time of determination directors or officers (as defined in
Rule 16a-1(f) promulgated under the Exchange Act) of the Company, or beneficial
owners (as determined in accordance with Rule 13d-3 promulgated under the
Exchange Act) of 10% or more the Company's outstanding Common Stock.

                           (b) The obligations of the Company and the rights of
the holders of the Notes, the Warrants and the Warrant Shares under this
Agreement may be waived only with the written consent of the holders of at least
fifty percent (50%) of the aggregate outstanding principal amount of the Notes
held by Non-Affiliates.

                  7.7 DELAYS OR OMISSIONS. It is agreed that no delay or
omission to exercise any right, power or remedy accruing to any party, upon any
breach, default or noncompliance by another party under this Agreement, shall
impair any such right, power or remedy, nor shall it be construed to be a waiver
of any such breach, default or noncompliance, or any acquiescence therein, or of
or in any similar breach, default or noncompliance thereafter occurring. It is
further agreed that any waiver, permit, consent or approval of any kind or
character on any Purchaser's part of any breach, default or noncompliance under
this Agreement or any waiver on such party's part of any provisions or
conditions of the Agreement must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement, or otherwise afforded to any party, shall be cumulative and not
alternative.

                  7.8 NOTICES. All notices required or permitted hereunder shall
be in writing and shall be deemed effectively given: (a) upon personal delivery
to the party to be notified; (b) when sent by confirmed facsimile if sent during
normal business hours of the recipient, if not, then on the next business day;
(c) five (5) days after having been sent by registered or certified mail, return
receipt requested, postage prepaid; or (d) one (1) day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the Company
at the address as set forth on the signature page hereof and to Purchaser at the
address set forth on the signature page hereof or at such other address as the
Company or Purchaser may designate by ten (10) days advance written notice to
the other parties hereto.

                  7.9 EXPENSES. Each party shall pay all costs and expenses that
it incurs with respect to the negotiation, execution, delivery and performance
of this Agreement, the Notes and the Warrants.


                                      -20-
<PAGE>

                  7.10 ATTORNEYS' FEES. In the event that any dispute among the
parties to this Agreement should result in litigation, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.

                  7.11 CONFIDENTIALITY. The Company shall not publicly disclose
the name or identity of any Purchaser unless (i) required by law or the rules
and regulations of the SEC, (ii) such Purchaser has given its prior written
consent or (iii) such information is already in the public domain.

                  7.12 TITLES AND SUBTITLES. The titles of the sections and
subsections of the Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.

                  7.13 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, by facsimile, or both, each of which shall be an
original, but all of which together shall constitute one instrument.

                  7.14 BROKER'S FEES. Each party hereto represents and warrants
that no agent, broker, investment banker, person or firm acting on behalf of or
under the authority of such party hereto is or will be entitled to any broker's
or finder's fee or any other commission directly or indirectly in connection
with the transactions contemplated herein. Notwithstanding the foregoing, the
Company may pay finder's fees in cash equal to up to 4% of the purchase price of
the Notes for the introduction of qualified Purchasers accepted by the Company.
Each party hereto further agrees to indemnify each other party for any claims,
losses or expenses incurred by such other party as a result of the
representation in this SECTION 7.14 being untrue.

                  7.15 EXCULPATION AMONG PURCHASERS. Each Purchaser acknowledges
that it is not relying upon any person, firm, or corporation, other than the
Company and its officers and directors, in making its investment or decision to
invest in the Company. Each Purchaser agrees that no Purchaser nor the
respective controlling persons, officers, directors, partners, agents, or
employees of any Purchaser shall be liable for any action heretofore or
hereafter taken or omitted to be taken by any of them in connection with the
Securities and Warrant Shares.

                  7.16 PRONOUNS. All pronouns contained herein, and any
variations thereof, shall be deemed to refer to the masculine, feminine or
neutral, singular or plural, as to the identity of the parties hereto may
require.

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]


                                      -21-
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed the Promissory
Note and Warrant Purchase Agreement as of the date set forth in the first
paragraph hereof.

COMPANY:                                    PURCHASER:

AMERICAN TECHNOLOGY CORPORATION
                                            [Print Name of Purchaser]

13114 Evening Creek Drive South
San Diego, California  92128

By:  ________________________________      By:  ________________________________

Name: _______________________________      Title (if any) ______________________

Title: ______________________________
                                           Street address (not PO BOX):

                                           _____________________________________

                                           _____________________________________

                                           _____________________________________


                                           Phone number: _______________________

                                           Fax number: _________________________

                                           E-mail address: _____________________


                                      -22-

<PAGE>

<TABLE>
                                          PROMISSORY AND WARRANT PURCHASE AGREEMENT

                                                          EXHIBIT A

                                                    SCHEDULE OF PURCHASERS


                                                                                                                 SHARES OF
                                                                       AGGREGATE            PRINCIPAL           COMMON STOCK
                                                                       PURCHASE             AMOUNT OF            UNDERLYING
                           NAME                                         PRICE                 NOTE                WARRANT
- -----------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                   <C>                    <C>
</TABLE>


                                                             A-1
<PAGE>

                                    EXHIBIT B

                             FORM OF PROMISSORY NOTE




                                       B-1
<PAGE>



                                    EXHIBIT C

                                 FORM OF WARRANT




                                       C-1


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.40
<SEQUENCE>12
<FILENAME>atc_10kex10-40.txt
<TEXT>
<PAGE>
                                                                   EXHIBIT 10.40


                                                                       No. N-___

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND ARE "RESTRICTED
SECURITIES" AS THAT TERM IS DEFINED IN RULE 144 UNDER SUCH ACT. THEY MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION
STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT AND APPLICABLE
LAWS OR SOME OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT
AND/OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED.

                         AMERICAN TECHNOLOGY CORPORATION
                     UNSECURED SUBORDINATED PROMISSORY NOTE


$                                                          San Diego, California
 -------------------                                           December 23, 2004

AMERICAN TECHNOLOGY CORPORATION, a Delaware corporation (the "Company"), for
value received hereby promises to pay to , or its assigns, the sum of ($ ), or
such lesser amount as shall then equal the outstanding principal amount hereof
and any unpaid accrued interest hereon, as set forth below, which shall all be
due and payable, unless earlier prepaid pursuant to the terms hereof, on the
earlier to occur of (i) December 31, 2006, or (ii) when declared due and payable
by the Holder upon the occurrence and during the continuance of an Event of
Default (as defined below) ("Maturity Date"). Payment for all amounts due
hereunder shall be made by mail to the registered address of the Holder as
defined below.

         This note ("Note") is one of a series of notes issued pursuant to the
Promissory Note and Warrant Purchase Agreement dated as of December 23, 2004 by
and between the Company and the purchasers described therein (the "Purchase
Agreement"), which notes are collectively referred to as the "Notes". Holder and
the Company agree that they shall be bound by all the terms, conditions and
provisions of the Purchase Agreement. Capitalized terms used, but not otherwise
defined herein, shall have the meaning given to such terms in the Purchase
Agreement.

         The following is a statement of the rights of the Holder of this Note
and the conditions to which this Note is subject, and to which the Holder
hereof, by the acceptance of this Note, agrees:

1. DEFINITIONS. As used in this Note, the following terms, unless the context
otherwise requires, have the following meanings:

         1.1 "Company" includes any corporation which shall succeed to or assume
the obligations of the Company under this Note.


                                      -1-
<PAGE>

         1.2 "Holder," when the context refers to a holder of this Note, shall
mean any person who shall at the time be the registered holder of this Note;
provided that any Holder shall be bound by the terms and conditions of this Note
and the Purchase Agreement.

2. INTEREST. The Company shall pay interest on the unpaid principal balance from
the Closing Date at the rate of eight percent (8%) per annum, or the maximum
rate permissible under the laws of the State of California relating to
permissible rates of interest for commercial loans, whichever is less (the
"Interest Rate"). Interest shall be calculated on the daily unpaid principal
balance hereof based on the actual number of days elapsed in the interest
payment period over a year of 365 days, or 366 days, as appropriate. Each
payment shall be credited first to interest then due, and the balance, if any,
to principal.

3. PAYMENT SCHEDULE. All payments under this Note must be made pro rata to the
holders of all Notes outstanding at the time of any such payment based on the
total principal and interest then due to each such Holder. Interest shall be due
and payable quarterly, in arrears, on or before the first day of each calendar
quarter, with the first interest payment due on or before April 1, 2005. This
Note may be prepaid in whole or in part from time to time without penalty after
June 30, 2005. In addition, unless the holders of a majority of the outstanding
principal balance under the Notes then held by Non-Affiliates agree otherwise,
the Company shall be required to use 40% of the net cash proceeds from each
Equity Financing (defined below) to prepay the Notes. For purposes of this Note,
"Equity Financing" shall mean a financing where capital stock or securities
convertible into capital stock of the Company are sold for cash proceeds by the
Company. The term "Equity Financing" shall not include: (a) any exercise of the
Warrants; (b) any exercise of other warrants of the Company outstanding on the
date of this Note; (c) any conversion of convertible securities of the Company
outstanding on the date hereof which pursuant to their terms may be converted or
exercised to Common Stock without payment of further cash consideration to the
Company; (d) the exercise of options, warrants or other Common Stock purchase
rights issued to employees, officers or directors of, or consultants or advisors
to, the Company or any subsidiary pursuant to stock purchase or stock option
plans, agreements or other arrangements that are approved by the Board of
Directors of the Company or the Compensation Committee thereof; (e) shares of
capital stock or securities convertible into capital stock of the Company issued
or issuable for consideration other than cash pursuant to a merger,
consolidation, acquisition or similar business combination approved by the Board
of Directors; (f) shares of capital stock or securities convertible into capital
stock of the Company issued or issuable pursuant to any equipment leasing
arrangement; (g) shares of capital stock or securities convertible into capital
stock of the Company issued or issuable pursuant to any debt financing from a
bank or similar financial institution approved by the Board of Directors; (h)
shares of capital stock or securities convertible into capital stock of the
Company issued or issuable with the approval of the Board of Directors to
customers or vendors of the Company or to persons with similar commercial
relationships with the Company; or (i) shares of capital stock or securities
convertible into capital stock of the Company issued or issuable pursuant to
corporate partnering transactions on terms approved by the Board of Directors.
If not otherwise prepaid, the outstanding principal amount hereof and any unpaid
accrued interest hereon shall be due and payable on the Maturity Date.


                                      -2-
<PAGE>

4. EVENTS OF DEFAULT. If any of the events specified in this SECTION 4 shall
occur (herein individually referred to as an "Event of Default"), the Holder of
the Note may, so long as such condition exists, declare the entire principal and
unpaid accrued interest hereon immediately due and payable, by notice in writing
to the Company:

         4.1 Default in the payment of the principal and unpaid accrued interest
of this Note when due and payable if such default is not cured by the Company
within thirty (30) days after the Holder has given the Company written notice of
such default; or

         4.2 The institution by the Company of proceedings to be adjudicated as
bankrupt or insolvent, or the consent by it to institution of bankruptcy or
insolvency proceedings against it or the filing by it of a petition or answer or
consent seeking reorganization or release under the federal Bankruptcy Act, or
any other applicable federal or state law, or the consent by it to the filing of
any such petition or the appointment of a receiver, liquidator, assignee,
trustee or other similar official of the Company, or of any substantial part of
its property, or the making by it of an assignment for the benefit of creditors,
or the taking of corporate action by the Company in furtherance of any such
action; or

         4.3 If, within ninety (90) days after the commencement of an action
against the Company (and service of process in connection therewith on the
Company) seeking any bankruptcy, insolvency, reorganization, liquidation or
dissolution or similar relief under any present or future statute, law or
regulation, such action shall not have been resolved in favor of the Company or
all orders or proceedings thereunder affecting the operations or the business of
the Company stayed, or if the stay of any such order or proceeding shall
thereafter be set aside, or if, within ninety (90) days after the appointment
without the consent or acquiescence of the Company of any trustee, receiver or
liquidator of the Company or of all or any substantial part of the properties of
the Company, such appointment shall not have been vacated.

5. RIGHTS OF HOLDER UPON DEFAULT. Upon the occurrence or existence of any Event
of Default and at any time thereafter during the continuance of such Event of
Default, Holder may declare all outstanding principal and accrued interest due
under this Note and payable by the Company hereunder to be immediately due and
payable in cash, by notice in writing to the Company.

6. SUBORDINATION. The indebtedness evidenced by this Note is hereby expressly
subordinated, to the extent and in the manner hereinafter set forth, in right of
payment to the prior payment in full of all the Company's Senior Indebtedness,
as hereinafter defined.

         6.1 SENIOR INDEBTEDNESS. As used in this Note, the term "Senior
Indebtedness" shall mean the principal of and unpaid accrued interest on: (i)
all indebtedness of the Company to banks, commercial finance lenders, insurance
companies or other financial institutions regularly engaged in the business of
lending money, which is for money borrowed by the Company (whether or not
secured), and (ii) amounts owed to equipment lessors pursuant to equipment lease
lines approved by the Company's Board of Directors, and (iii) all indebtedness
of the Company evidenced by notes, debentures, bonds or other securities of the
Company which are designated by and approved by the Company's Board of
Directors, and (iv) all obligations and liabilities in connection with the lease
of real property, and (v) all modifications, renewals, extensions and refundings
of indebtedness, liabilities or obligations of the kind described in any of the
preceding clauses, provided, however no indebtedness of the Company, all or part


                                      -3-
<PAGE>

of which is convertible into equity, and no indebtedness which has a material
equity component shall be designated as Senior Indebtedness by the Company
without the consent of the holders of a majority of the outstanding principal
balance under the Notes then held by Non-Affiliates.

         6.2 DEFAULT ON SENIOR INDEBTEDNESS. If there should occur any
receivership insolvency, assignment for the benefit of creditors, bankruptcy,
reorganization or arrangement with creditors (whether or not pursuant to
bankruptcy or other insolvency laws), sale of all or substantially all of the
assets, dissolution, liquidation or any other marshalling of the assets and
liabilities of the Company, or if this Note shall be declared due and payable
upon the occurrence of an Event of Default with respect to any Senior
Indebtedness, then (i) no amount shall be paid by the Company in respect of the
principal of or interest on this Note at the time outstanding, unless and until
the principal of and interest on the Senior Indebtedness then outstanding shall
be satisfied, and (ii) no claim or proof of claim shall be filed with the
Company by or on behalf of the Holder of this Note that shall assert any right
to receive any payment in respect of the principal of and interest on this Note,
except subject to the satisfaction of the principal of and interest on all of
the Senior Indebtedness then outstanding. If there occurs an event of default
that has been declared in writing with respect to any Senior Indebtedness, or in
the instrument under which any Senior Indebtedness is outstanding, permitting
the holder of such Senior Indebtedness to accelerate the maturity thereof, then,
unless and until such event of default shall have been cured or waived or shall
have ceased to exist, or all Senior Indebtedness shall have been satisfied, no
payment shall be made in respect of the principal of or interest on this Note,
unless within three (3) months after the happening of such event of default, the
maturity of such Senior Indebtedness shall not have been accelerated.

         6.3 EFFECT OF SUBORDINATION. Subject to the rights, if any, of the
holders of Senior Indebtedness under this SECTION 6 to receive cash, securities
or other properties otherwise payable or deliverable to the Holder of this Note,
nothing contained in this SECTION 6 shall impair, as between the Company and the
Holder, the obligation of the Company, subject to the terms and conditions
hereof, to pay to the Holder the principal hereof and interest hereon as and
when the same become due and payable, or shall prevent the Holder of this Note,
upon default hereunder, from exercising all rights, powers and remedies
otherwise provided herein or by applicable law.

         6.4 SUBROGATION. Subject to the payment in full of all Senior
Indebtedness and until this Note shall be paid in full, the Holder shall be
subrogated to the rights of the holders of Senior Indebtedness (to the extent of
payments or distributions previously made to such holders of Senior Indebtedness
pursuant to the provisions of SECTION 6.2 above) to receive payments or
distributions of assets of the Company applicable to the Senior Indebtedness. No
such payments or distributions applicable to the Senior Indebtedness shall, as
between the Company and its creditors, other than the holders of Senior
Indebtedness and the Holder, be deemed to be a payment by the Company to or on
account of this Note; and for the purposes of such subrogation, no payments or
distributions to the holders of Senior Indebtedness to which the Holder would be
entitled except for the provisions of this SECTION 6 shall, as between the
Company and its creditors, other than the holders of Senior Indebtedness and the
Holder, be deemed to be a payment by the Company to or on account of the Senior
Indebtedness.


                                      -4-
<PAGE>

         6.5 UNDERTAKING. By its acceptance of this Note, the Holder agrees to
execute and deliver such documents as may be reasonably requested from time to
time by the Company or the holder of any Senior Indebtedness in order to
implement the foregoing provisions of this SECTION 6.

         6.6 PRO RATA DISTRIBUTION In the event that the Company's assets are
insufficient to satisfy the Holder of this Note and the holders of all other
Notes issued pursuant to the Purchase Agreement, the Company's available assets
shall be distributed pro rata to all such holders based on the total principal
and interest then due to each such holder.

7. REPRESENTATIONS AND WARRANTIES OF THE HOLDER. The Holder agrees to be bound
by the terms and conditions, and makes the representations and warranties, in
the Purchase Agreement.

8. USURY. Holder acknowledges it has been advised by the Company that the
Company believes the Interest Rate payable herein is exempt from the usury
provisions of the General Corporations Law of the State of California ("GCLC"),
pursuant to Section 25118 of the California Corporations Code, provided,
however, the Company expressly disclaims any representation or warranty that the
Interest Rate payable in this Note is exempt from the usury provisions of the
GCLC under such section or is otherwise exempt from the usury provisions of
applicable California law.

9. ADDITIONAL RESTRICTIONS ON TRANSFER AND INTEREST EARNED. Registry books are
kept at the office of the Company. The transfer of this Note must be registered
on the registry of the Company. This Note must be surrendered for transfer at
the office or agency of the Company, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company, duly
executed by the Holder hereof or its attorney-in-fact, duly authorized in
writing. Thereafter, one or more new Notes, or authorized denominations, and for
the same aggregate principal amount, shall be issued to the designated
transferee or transferees. The parties intend that the interest earned under
this Note shall be "portfolio interest" of an "obligation in registered form"
for U.S. income tax purposes in accordance with IRC Sections 871(h) and 881(c)
and Treasury Regulation Section 1.871-14.

10. ASSIGNMENT. Subject to the restrictions on transfer described herein, the
rights and obligations of the Company and the Holder of this Note shall be
binding upon and benefit the successors, assigns, heirs, administrators and
transferees of the parties.

11. EXPENSES; WAIVERS. In the event that any dispute among the parties to this
Note should result in litigation, the prevailing party in such dispute shall be
entitled to recover from the losing party all fees, costs and expenses of
enforcing any right of such prevailing party under or with respect to this Note,
including without limitation, such reasonable fees and expenses of attorney's
and accountants, which shall also include, without limitation, all fees, costs
and expenses of appeals. Except as otherwise set forth herein, the Company
hereby waives notice of default, presentation or demand for payment, protest or
notice of nonpayment or dishonor and all other notices or demands relative to
this Note.


                                      -5-
<PAGE>

12. WAIVER AND AMENDMENT. Any provision of this Note may be amended, waived or
modified upon the written consent of the Company and the holders of a majority
of the face amount of all then outstanding Notes.

13. NOTICES. Any notice, request or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been duly given if
given in accordance with SECTION 7.8 of the Purchase Agreement.

14. GOVERNING LAW. This Note and all actions arising out of or in connection
with this Note shall be governed by and construed in accordance with the laws of
the State of California, excluding that body of law relating to conflict of
laws. 15. Heading; References. All headings used herein are used for convenience
only and shall not be used to construe or interpret this Note. Except where
otherwise indicated, all references herein to Sections refer to Sections hereof.

IN WITNESS WHEREOF, the Company has caused this Note to be issued this 23rd day
of December 2004.

                                    AMERICAN TECHNOLOGY CORPORATION



                                    By:
                                           -------------------------------------

                                    Title:
                                           -------------------------------------

Acknowledged and Agreed:


- -----------------------------------------------------

By:
         --------------------------------------------

Title:
         --------------------------------------------

Address:
         --------------------------------------------

         --------------------------------------------

                                      -6-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.41
<SEQUENCE>13
<FILENAME>atc_10kex10-41.txt
<TEXT>
<PAGE>
                                                                   EXHIBIT 10.41


                                                                      No. W-N___

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.

                      WARRANT TO PURCHASE _________ SHARES
                               OF COMMON STOCK OF
                         AMERICAN TECHNOLOGY CORPORATION
                         (VOID AFTER DECEMBER 31, 2009)

         This certifies that _________________________________ or its assigns
(the "Holder"), for value received, is entitled to purchase from AMERICAN
TECHNOLOGY CORPORATION, a Delaware corporation (the "Company"), having a place
of business at 13114 Evening Creek Drive South, San Diego, California 92128, a
maximum of ______________(1) fully paid and nonassessable shares of the
Company's Common Stock ("Common Stock") for cash at a price of
________________________ (_____)(2) per share, as may be adjusted as provided
herein (the "Stock Purchase Price"), at any time or from time to time up to and
including 5:00 p.m. (Pacific time) on December 31, 2009 (the "Expiration Date"),
upon surrender to the Company at its principal office (or at such other location
as the Company may advise the Holder in writing) of this Warrant properly
endorsed with the Form of Subscription attached hereto duly filled in and signed
and, if applicable, upon payment in cash or by check of the aggregate Stock
Purchase Price for the number of shares for which this Warrant is being
exercised determined in accordance with the provisions hereof. The Stock
Purchase Price and the number of shares purchasable hereunder are subject to
adjustment as provided in Section 3 of this Warrant.

         This warrant to purchase Common Stock (this "Warrant") is one of a
series of warrants issued pursuant to the Promissory Note and Warrant Purchase
Agreement dated as of December 23, 2004 (the "Purchase Agreement"), which
warrants are collectively referred to herein as the "Warrants."

         This Warrant is subject to the following terms and conditions:

1.       EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.

                  1.1 GENERAL. This Warrant is exercisable at the option of the
holder of record hereof, at any time or from time to time, up to the Expiration
Date for all or any part of the shares of Common Stock (but not for a fraction
of a share) which may be purchased hereunder. The Company agrees that the shares


- ----------
(1)      7,500 shares for every $100,000 principal of notes, prorated.

(2)      $9.26 per share if Holder is a director, officer, employee or
         consultant of the Company on the date hereof, and $8.60 per share
         otherwise.

                                      -1-
<PAGE>

of Common Stock purchased under this Warrant shall be and are deemed to be
issued to the Holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered,
properly endorsed, the completed, executed Form of Subscription delivered and
payment made for such shares. Certificates for the shares of Common Stock so
purchased, together with any other securities or property to which the Holder
hereof is entitled upon such exercise, shall be delivered to the Holder hereof
by the Company at the Company's expense within five (5) business days after the
rights represented by this Warrant have been so exercised. In case of a purchase
of less than all the shares which may be purchased under this Warrant, the
Company shall cancel this Warrant and execute and deliver a new Warrant or
Warrants of like tenor for the balance of the shares purchasable under the
Warrant surrendered upon such purchase to the Holder hereof within five (5)
business days. Each stock certificate so delivered shall be in such
denominations of Common Stock as may be requested by the Holder hereof and shall
be registered in the name of such Holder. Notwithstanding anything to the
contrary set forth above, each exercise of the Warrant shall cover at least the
lesser of (i) 7,500 shares of Common Stock (as adjusted for stock splits, stock
dividends, combinations and the like), or (ii) the total number of shares of
Common Stock then subject to the Warrant.

                  1.2 NET ISSUE EXERCISE. Notwithstanding any provisions herein
to the contrary, if the fair market value of one share of the Company's Common
Stock is greater than the Stock Purchase Price (at the date of calculation as
set forth below), in lieu of exercising this Warrant for cash, the Holder may
elect to receive shares equal to the value (as determined below) of this Warrant
(or the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company together with the properly endorsed Form of
Subscription and notice of such election in which event the Company shall issue
to the Holder a number of shares of Common Stock  X = Y(A-B)
                                                      -----
                                                        A

         Where X = the number of shares of Common Stock to be issued to the
Holder

                                    Y = the number of shares of Common Stock
                                    purchasable under the Warrant or, if only a
                                    portion of the Warrant is being exercised,
                                    the portion of the Warrant being canceled
                                    (at the date of such calculation)

                                    A = the fair market value of one share of
                                    the Company's Common Stock (at the date of
                                    such calculation)

                                    B = Stock Purchase Price (as adjusted to the
                                    date of such calculation)

For purposes of the above calculation, fair market value of one share of Common
Stock shall be the volume weighted average price of the Company's Common Stock
from the hours of 9:30 a.m. to 4:00 p.m. on the Principal Market (defined below)


                                      -2-
<PAGE>

as reported by Bloomberg Financial using the AQR function for the five (5)
trading days immediately preceding the date of exercise for which there are
reported transactions in the Common Stock. Principal Market means the Nasdaq
National Market, the Nasdaq SmallCap Market, the American Stock Exchange or the
New York Stock Exchange, whichever is at the time the principal trading exchange
or market for the Common Stock.

                  2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company
covenants and agrees that all shares of Common Stock that may be issued upon the
exercise of the rights represented by this Warrant will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any stockholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees
that, during the period within which the rights represented by this Warrant may
be exercised, the Company will at all times have authorized and reserved, for
the purpose of issue or transfer upon exercise of the subscription rights
evidenced by this Warrant, a sufficient number of shares of authorized but
unissued Common Stock, or other securities and property, when and as required to
provide for the exercise of the rights represented by this Warrant. The Company
will take all such action as may be necessary to assure that such shares of
Common Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any domestic securities
exchange upon which the Common Stock may be listed; provided, however, that the
Company shall not be required to effect a registration under Federal or State
securities laws with respect to such exercise other than as provided pursuant to
the Purchase Agreement. The Company will not take any action which would result
in any adjustment of the Stock Purchase Price (as set forth in Section 3 hereof)
if the total number of shares of Common Stock issuable after such action upon
exercise of all outstanding warrants, together with all shares of Common Stock
then outstanding and all shares of Common Stock then issuable upon exercise of
all options and upon the conversion of all convertible securities then
outstanding, would exceed the total number of shares of Common Stock then
authorized by the Company's Certificate of Incorporation.

                  3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES.
The Stock Purchase Price and the number of shares purchasable upon the exercise
of this Warrant shall be subject to adjustment from time to time upon the
occurrence of certain events described in this Section 3. Upon each adjustment
of the Stock Purchase Price, the Holder of this Warrant shall thereafter be
entitled to purchase, at the Stock Purchase Price resulting from such
adjustment, the number of shares obtained by multiplying the Stock Purchase
Price in effect immediately prior to such adjustment by the number of shares
purchasable pursuant hereto immediately prior to such adjustment, and dividing
the product thereof by the Stock Purchase Price resulting from such adjustment.

                  3.1 SUBDIVISION OR COMBINATION OF STOCK. In case the Company
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the Stock Purchase Price in effect immediately prior
to such subdivision shall be proportionately reduced, and conversely, in case
the outstanding shares of Common Stock of the Company shall be combined into a
smaller number of shares, the Stock Purchase Price in effect immediately prior
to such combination shall be proportionately increased.


                                      -3-
<PAGE>

                  3.2 DIVIDENDS IN COMMON STOCK, OTHER STOCK, PROPERTY,
RECLASSIFICATION. If at any time or from time to time the Holders of Common
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,

                           (a) Common Stock or any shares of stock or other
securities which are at any time directly or indirectly convertible into or
exchangeable for Common Stock, or any rights or options to subscribe for,
purchase or otherwise acquire any of the foregoing by way of dividend or other
distribution,

                           (b) any cash paid or payable otherwise than as a cash
dividend, or

                           (c) Common Stock or additional stock or other
securities or property (including cash) by way of spinoff, split-up,
reclassification, combination of shares or similar corporate rearrangement,
(other than shares of Common Stock issued as a stock split or adjustments in
respect of which shall be covered by the terms of Section 3.1 above), then and
in each such case, the Holder hereof shall, upon the exercise of this Warrant,
be entitled to receive, in addition to the number of shares of Common Stock
receivable thereupon, and without payment of any additional consideration
therefor, the amount of stock and other securities and property (including cash
in the cases referred to in clause (b) above and this clause (c)) which such
Holder would hold on the date of such exercise had he been the holder of record
of such Common Stock as of the date on which holders of Common Stock received or
became entitled to receive such shares or all other additional stock and other
securities and property.

                  3.3 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. If any recapitalization, reclassification or reorganization of the capital
stock of the Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets or other
transaction shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities, or other assets or property (an
"Organic Change"), then, as a condition of such Organic Change, lawful and
adequate provisions shall be made by the Company whereby the Holder hereof shall
thereafter have the right to purchase and receive (in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable and receivable
upon the exercise of the rights represented hereby) such shares of stock,
securities or other assets or property as may be issued or payable with respect
to or in exchange for a number of outstanding shares of such Common Stock equal
to the number of shares of such stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby; provided,
however, that in the event the value of the stock, securities or other assets or
property (determined in good faith by the Board of Directors of the Company)
issuable or payable with respect to one share of the Common Stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby is in excess of the Stock Purchase Price hereof
effective at the time of a merger and securities received in such
reorganization, if any, are publicly traded, then this Warrant shall expire
unless exercised prior to or simultaneous with such Organic Change. In the event
of any Organic Change, appropriate provision shall be made by the Company with
respect to the rights and interests of the Holder of this Warrant to the end
that the provisions hereof (including, without limitation, provisions for


                                      -4-
<PAGE>

adjustments of the Stock Purchase Price and of the number of shares purchasable
and receivable upon the exercise of this Warrant) shall thereafter be
applicable, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise hereof. The Company will not effect any such
consolidation, merger or sale unless, prior to the consummation thereof, the
successor corporation (if other than the Company) resulting from such
consolidation or the corporation purchasing such assets shall assume by written
instrument reasonably satisfactory in form and substance to the Holders of a
majority of the warrants to purchase Common Stock then outstanding, executed and
mailed or delivered to the registered Holder hereof at the last address of such
Holder appearing on the books of the Company, the obligation to deliver to such
Holder such shares of stock, securities or assets as, in accordance with the
foregoing provisions, such Holder may be entitled to purchase.

                  3.4 CERTAIN EVENTS. If any change in the outstanding Common
Stock of the Company or any other event occurs as to which the foregoing
provisions of this Section 3 are not strictly applicable or if strictly
applicable would not fairly protect the purchase rights of the Holder of the
Warrant in accordance with such provisions, then the Board of Directors of the
Company shall make an adjustment in the number and class of shares available
under the Warrant, the Stock Purchase Price or the application of such
provisions, so as to protect such purchase rights as aforesaid. The adjustment
shall be such as will give the Holder of the Warrant upon exercise for the same
aggregate Stock Purchase Price the total number, class and kind of shares as he
would have owned had the Warrant been exercised prior to the event and had he
continued to hold such shares until after the event requiring adjustment.

                  3.5 NOTICES OF CHANGE.

                           (a) Within 10 business days after any adjustment in
the number or class of the shares subject to this Warrant and of the Stock
Purchase Price, the Company shall give written notice thereof to the Holder,
setting forth in reasonable detail and certifying the calculation of such
adjustment.

                           (b) The Company shall give written notice to the
Holder at least 15 business days prior to the date on which the Company closes
its books or takes a record for determining rights to receive any dividends or
distributions.

                           (c) The Company shall also give written notice to the
Holder at least 15 business days prior to the date on which an Organic Change
shall take place.

                  4. ISSUE TAX. The issuance of certificates for shares of
Common Stock upon the exercise of the Warrant shall be made without charge to
the Holder of the Warrant for any issue tax (other than any applicable income
taxes) in respect thereof; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of any certificate in a name other than that of the
then Holder of the Warrant being exercised.


                                      -5-
<PAGE>

                  5. CLOSING OF BOOKS. The Company will at no time close its
transfer books against the transfer of any warrant or of any shares of Common
Stock issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of this Warrant.

                  6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY.
Other than as set forth herein, nothing contained in this Warrant shall be
construed as conferring upon the Holder hereof the right to vote or to consent
or to receive notice as a shareholder of the Company or any other matters or any
rights whatsoever as a shareholder of the Company. No dividends or interest
shall be payable or accrued in respect of this Warrant or the interest
represented hereby or the shares purchasable hereunder until, and only to the
extent that, this Warrant shall have been exercised. No provisions hereof, in
the absence of affirmative action by any holder, and no mere enumeration herein
of the rights or privileges of the holder hereof, shall give rise to any
liability of such Holder for the Stock Purchase Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by its creditors.

                  7. WARRANTS TRANSFERABLE. Subject to compliance with
applicable federal and state securities laws, this Warrant and all rights
hereunder are transferable, in whole or in part, without charge to the holder
hereof (except for transfer taxes), upon surrender of this Warrant properly
endorsed. Each taker and holder of this Warrant, by taking or holding the same,
consents and agrees that this Warrant, when endorsed in blank, shall be deemed
negotiable, and that the holder hereof, when this Warrant shall have been so
endorsed, may be treated by the Company, at the Company's option, and all other
persons dealing with this Warrant as the absolute owner hereof for any purpose
and as the person entitled to exercise the rights represented by this Warrant,
or to the transfer hereof on the books of the Company any notice to the contrary
notwithstanding; but until such transfer on such books, the Company may treat
the registered owner hereof as the owner for all purposes.

                  8. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The
rights and obligations of the Company, of the holder of this Warrant and of the
holder of shares of Common Stock issued upon exercise of this Warrant, shall
survive the exercise of this Warrant.

                  9. MODIFICATION AND WAIVER. This Warrant and any provision
hereof may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought;
provided, however, that any term of this Warrant may be amended with the written
consent of the Company and the holders of Warrants representing a majority in
interest of the shares of Common Stock then issuable upon exercise of the
Warrants issued pursuant to the Purchase Agreement that are then held by
Non-Affiliates (as defined in the Purchase Agreement), and any amendment so
effected shall be binding upon each holder of such Warrants.

                  10. NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the holder hereof or the Company shall be
delivered or shall be sent by certified mail, postage prepaid, to each such
holder at its address as shown on the books of the Company or to the Company at
the address indicated therefor in the first paragraph of this Warrant or such
other address as either may from time to time provide to the other.


                                      -6-
<PAGE>

                  11. BINDING EFFECT ON SUCCESSORS. This Warrant shall be
binding upon any corporation succeeding the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets. All of the
obligations of the Company relating to the Common Stock issuable upon the
exercise of this Warrant shall survive the exercise and termination of this
Warrant. All of the covenants and agreements of the Company shall inure to the
benefit of the successors and assigns of the holder hereof.

                  12. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description
headings of the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. This Warrant
shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the State of California.

                  13. LOST WARRANTS. The Company represents and warrants to the
Holder hereof that upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction, or mutilation of this Warrant and, in
the case of any such loss, theft or destruction, upon receipt of an indemnity
reasonably satisfactory to the Company, or in the case of any such mutilation
upon surrender and cancellation of such Warrant, the Company, at its expense,
will make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.

                  14. FRACTIONAL SHARES. No fractional shares shall be issued
upon exercise of this Warrant. The Company shall, in lieu of issuing any
fractional share, pay the holder entitled to such fraction a sum in cash equal
to such fraction multiplied by the then effective Stock Purchase Price.

                  15. LEGEND. The Holder understands and agrees that all
certificates evidencing the shares to be issued to the Holder may bear the
following legend:

                  THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
                  ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD,
                  OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
                  EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
                  THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
                  CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.

                  16. SPECIFIC PERFORMANCE. The parties hereto hereby declare
that it is impossible to measure in money the damages which will accrue to a
party hereto or to their heirs, personal representatives, or assigns by reason
of a failure to perform any of the obligations under this Warrant and agree that
the terms of this Warrant shall be specifically enforceable. If any party hereto
or his heirs, personal representatives, or assigns institutes any action or
proceeding to specifically enforce the provisions hereof, any person against
whom such action or proceeding is brought hereby waives the claim or defense
therein that such party or such personal representative has an adequate remedy
at law, and such person shall not offer in any such action or proceeding the
claim or defense that such remedy at law exists.


                                      -7-
<PAGE>

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]


                                      -8-
<PAGE>

         IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this 23rd day of December,
2004.

                                  AMERICAN TECHNOLOGY CORPORATION,
                                  a Delaware corporation


                                  By:
                                         ---------------------------------------

                                  Name:
                                         ---------------------------------------

                                  Title:
                                         ---------------------------------------


                                      -9-
<PAGE>

                                    EXHIBIT A
                                SUBSCRIPTION FORM

                                                  Date: _________________, _____
American Technology Corporation
13114 Evening Creek Drive South
San Diego, California 92128
Attn: Chief Financial Officer

Ladies and Gentlemen:

         The undersigned hereby elects to exercise the warrant issued to it by
American Technology Corporation (the "Company") and dated December 23, 2004,
Warrant No. W-N___ (the "Warrant") and to purchase thereunder
___________________________ shares of the Common Stock of the Company (the
"Shares") at a purchase price of __________________ (________)(3) per Share for
an aggregate purchase price of _____________________ Dollars ($__________) (the
"Purchase Price").

         Pursuant to the terms of the Warrant the undersigned has (check one
that applies):

         [ ]      Delivered the aggregate Purchase Price herewith in full in
                  cash or by certified check or wire transfer; or

         [ ]      Elected to Net Issue Exercise as described in Section 1.2 of
                  the Warrant.

         The undersigned hereby reaffirms the representations and warranties
made in Section 4 of the Purchase Agreement as if made on the date hereof.



                                    Very truly yours,


                                    --------------------------------------------
                                    Signature

                                    Name:
                                          --------------------------------------

                                    Title:
                                           -------------------------------------


- --------
(3)      $9.28 per share if Holder was a director, officer, employee or
         consultant of the Company, or an affiliate of such person, on the date
         of the Warrant, and $8.60 per share otherwise.

                                      -10-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>14
<FILENAME>atc_10kex23-1.htm
<TEXT>
<HTML><HEAD>
<TITLE>
exhibit 23.1
</TITLE>
</HEAD>
<BODY><DIV><BR>
<TABLE id=FIRSTHDR width="100%">
<TR>
<TD vAlign=bottom width="100%" colSpan=3>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=right><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exhibit 23.1</FONT></DIV></TD></TR></TABLE>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">CONSENT OF INDEPENDENT</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">REGISTERED PUBLIC ACCOUNTING FIRM</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">American Technology Corporation</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">San Diego, California</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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
  November 10, 2004, except for Note 14 as to which the date is December
  23, 2004, relating to the financial statements of American Technology
  Corporation appearing in the Company's Annual Report on Form 10-K for the year
  ended September 30, 2004. </FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR>
  <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%">
    <tr>
      <td width="33%">&nbsp;</td>
      <td width="22%">&nbsp;</td>
      <td width="45%"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>/s/ BDO SEIDMAN, LLP<br>
      </u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; BDO Seidman, LLP</FONT></td>
    </tr>
  </table>
  </DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT><FONT id=TAB2 style="COLOR: black; LETTER-SPACING: 27pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;<FONT id=TAB2 style="COLOR: black; LETTER-SPACING: 27pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;<FONT id=TAB2 style="COLOR: black; LETTER-SPACING: 27pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;<FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;<FONT id=TAB2 style="LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><FONT id=TAB2 style="LETTER-SPACING: 9pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;<FONT id=TAB2 style="LETTER-SPACING: 9pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;<FONT id=TAB2 style="LETTER-SPACING: 9pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;<FONT id=TAB2 style="LETTER-SPACING: 9pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;<FONT id=TAB2 style="LETTER-SPACING: 9pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;<FONT id=TAB2 style="LETTER-SPACING: 9pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;<FONT id=TAB2 style="LETTER-SPACING: 9pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;<FONT id=TAB2 style="LETTER-SPACING: 9pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

  </FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Costa Mesa, CA</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">December
  28, 2004.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV valign="top"></DIV>
<TABLE id=LASTFTR width="100%">
<TR>
<TD align=middle width="33%">&nbsp;</TD>
<TD align=right width="33%">&nbsp;</TD></TR></TABLE></DIV>
<hr size="2" color="#C0C0C0">
<div STYLE="page-break-before: always">&nbsp;</div>
<p>&nbsp;</p>

</BODY></HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>15
<FILENAME>exhibit_31.htm
<TEXT>
<html>
<head>
<title>Exhibit 31</title>
</head>

<body >
<ul>
</ul>

<p align="right">
<b><font size="2">Exhibit 31.1</font></b><p>
<b><font size="2">CERTIFICATIONS</font></b><p>
<font size="2">I, Elwood G. Norris, certify that: </font> </p>
<div style="position:relative; left: 30">
  <table border=0 cellpadding=0 cellspacing =0 style="border-collapse: collapse" bordercolor="#111111" width="736" >
<tr valign="top">
<td width="46" colspan="1" rowspan="1" >
<p>
<font size="2">1.</font></p>
</td>
<td width="690" colspan="4" rowspan="1" >
<p>
<font size="2">I have reviewed this annual report on Form 10-K of American Technology
Corporation; </font> </p>
</td>
</tr>
<tr valign="top">
<td width="46" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="254" colspan="3" rowspan="1" >
&nbsp;</td>
<td width="436" colspan="1" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="46" colspan="1" rowspan="1" >
<p>
<font size="2">2.</font></p>
</td>
<td width="690" colspan="4" rowspan="1" >
<p>
<font size="2">Based on my knowledge, this 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 report; </font> </p>
</td>
</tr>
<tr valign="top">
<td width="46" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="254" colspan="3" rowspan="1" >
&nbsp;</td>
<td width="436" colspan="1" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="46" colspan="1" rowspan="1" >
<p>
<font size="2">3.</font></p>
</td>
<td width="690" colspan="4" rowspan="1" >
<p>
<font size="2">Based on my knowledge, the financial statements, and other financial information
included in this 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 report;</font></p>
</td>
</tr>
<tr valign="top">
<td width="46" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="254" colspan="3" rowspan="1" >
&nbsp;</td>
<td width="436" colspan="1" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="46" colspan="1" rowspan="1" >
<p>
<font size="2">4.</font></p>
</td>
<td width="690" colspan="4" rowspan="1" >
<p>
<font size="2">The registrant's other certifying officers 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> </p>
</td>
</tr>
<tr valign="top">
<td width="46" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="254" colspan="3" rowspan="1" >
&nbsp;</td>
<td width="436" colspan="1" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="46" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="37" rowspan="1" >
<p>
<font size="2">a)</font></p>
</td>
<td width="927" colspan="3" >
<p>
<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 report is being prepared; </font> </p>
</td>
</tr>
<tr valign="top">
<td width="46" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="37" rowspan="1" >
</td>
<td width="132" rowspan="1" >
&nbsp;</td>
<td width="795" colspan="2" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="46" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="37" rowspan="1" >
<p>
<font size="2">b)</font></p>
</td>
<td width="927" colspan="3" >
<p>
<font size="2">[paragraph omitted pursuant to SEC Release Nos. 33-2838 and 34-47986]</font></p>
</td>
</tr>
<tr valign="top">
<td width="46" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="37" rowspan="1" >
</td>
<td width="132" rowspan="1" >
&nbsp;</td>
<td width="795" colspan="2" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="46" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="37" rowspan="1" >
<p>
<font size="2">c)</font></p>
</td>
<td width="927" colspan="3" >
<p>
<font size="2">Evaluated the effectiveness of the registrant'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; and</font></p>
</td>
</tr>
<tr valign="top">
<td width="46" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="37" rowspan="1" >
</td>
<td width="132" rowspan="1" >
&nbsp;</td>
<td width="795" colspan="2" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="46" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="37" rowspan="1" >
<p>
<font size="2">d)</font></p>
</td>
<td width="927" colspan="3" >
<p>
<font size="2">Disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect the
registrant's internal control over financial reporting; and</font></p>
</td>
</tr>
<tr valign="top">
<td width="46" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="254" colspan="3" rowspan="1" >
&nbsp;</td>
<td width="436" colspan="1" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="46" colspan="1" rowspan="1" >
<p>
<font size="2">5.</font></p>
</td>
<td width="690" colspan="4" rowspan="1" >
<p>
<font size="2">The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's independent registered public accounting firm and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions): </font> </p>
</td>
</tr>
<tr valign="top">
<td width="46" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="40" rowspan="1" >
&nbsp;</td>
<td width="130" colspan="2" rowspan="1" >
&nbsp;</td>
<td width="436" colspan="1" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="46" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="40" rowspan="1" >
<p>
<font size="2">a)</font></p>
</td>
<td width="925" colspan="3" >
<p>
<font size="2">All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process, summarize and
report financial information; and </font> </p>
</td>
</tr>
<tr valign="top">
<td width="46" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="40" rowspan="1" >
</td>
<td width="130" rowspan="1" >
&nbsp;</td>
<td width="795" colspan="2" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="46" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="40" rowspan="1" >
<p>
<font size="2">b)</font></p>
</td>
<td width="925" colspan="3" >
<p>
<font size="2">Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant's internal controls over financial
reporting. </font> </p>
</td>
</tr>
</table></div>
<p>
<p>
<font size="2">Date: December 28, 2004 </font>
<table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%">
  <tr>
    <td width="8%">&nbsp;</td>
    <td width="92%">
<font size="2">/s/ ELWOOD G. NORRIS</font></td>
  </tr>
  <tr>
    <td width="8%">&nbsp;</td>
    <td width="92%">&nbsp;</td>
  </tr>
  <tr>
    <td width="8%">&nbsp;</td>
    <td width="92%">
<font size="2">&nbsp;Elwood G. Norris, <br>
    Chairman of the
Board<br>
    (Co-Principal Executive Officer)</font></td>
  </tr>
</table>
<p>
<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><hr size="2" color="#C0C0C0">
<div STYLE="page-break-before: always">&nbsp;</div>


</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>16
<FILENAME>exhibit_312.htm
<TEXT>
<html>
<head><meta content="text/html; charset=iso-8859-1">
<title>Exhibit 31</title>
</head>

<body >
<ul>
</ul>

<p align="right"><b><font size="2">&nbsp;Exhibit 31.2</font></b></p>
<p align="center"><b><font size="2">CERTIFICATIONS</font></b></p>
<p><font size="2">I, Kalani Jones, certify that: </font></p>
<div style="position:relative; left: 30">
  <table border=0 cellpadding=0 cellspacing =0 width="728" >
<tr valign="top">
<td width="36" colspan="1" rowspan="1" >
<font size="2">&nbsp;1. </font>	</td>
<td width="692" colspan="4" rowspan="1" >
<font size="2">I have reviewed this annual report on Form 10-K of American
Technology Corporation;
</font> 	</td>
</tr>
<tr valign="top">
<td width="36" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="261" colspan="3" rowspan="1" >
&nbsp;</td>
<td width="431" colspan="1" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="36" colspan="1" rowspan="1" >
<font size="2">&nbsp;2. </font>	</td>
<td width="692" colspan="4" rowspan="1" >
<font size="2">Based on my knowledge, this 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 report;
</font> 	</td>
</tr>
<tr valign="top">
<td width="36" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="261" colspan="3" rowspan="1" >
&nbsp;</td>
<td width="431" colspan="1" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="36" colspan="1" rowspan="1" >
<font size="2">&nbsp;3. </font>	</td>
<td width="692" colspan="4" rowspan="1" >
<font size="2">Based on my knowledge, the financial statements, and other
financial information included in this 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 report;
</font> 	</td>
</tr>
<tr valign="top">
<td width="36" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="261" colspan="3" rowspan="1" >
&nbsp;</td>
<td width="431" colspan="1" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="36" colspan="1" rowspan="1" >
<font size="2">&nbsp;4. </font>	</td>
<td width="692" colspan="4" rowspan="1" >
<font size="2">The registrant's other certifying officers 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>
<tr valign="top">
<td width="36" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="261" colspan="3" rowspan="1" >
&nbsp;</td>
<td width="431" colspan="1" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="36" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="36" rowspan="1" >
<font size="2">&nbsp;a) </font>	</td>
<td width="809" colspan="3" >
<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 report is being prepared;
</font>	</td>
</tr>
<tr valign="top">
<td width="36" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="36" rowspan="1" >
&nbsp;</td>
<td width="164" rowspan="1" >
&nbsp;</td>
<td width="645" colspan="2" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="36" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="36" rowspan="1" >
<font size="2">&nbsp;b) </font>	</td>
<td width="809" colspan="3" >
<font size="2">[paragraph omitted pursuant to SEC Release Nos. 33-2838 and
34-47986]
</font>	</td>
</tr>
<tr valign="top">
<td width="36" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="36" rowspan="1" >
&nbsp;</td>
<td width="164" rowspan="1" >
&nbsp;</td>
<td width="645" colspan="2" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="36" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="36" rowspan="1" >
<font size="2">&nbsp;c) </font>	</td>
<td width="809" colspan="3" >
<font size="2">Evaluated the effectiveness of the registrant'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; and
</font>	</td>
</tr>
<tr valign="top">
<td width="36" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="36" rowspan="1" >
&nbsp;</td>
<td width="164" rowspan="1" >
&nbsp;</td>
<td width="645" colspan="2" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="36" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="36" rowspan="1" >
<font size="2">&nbsp;d) </font>	</td>
<td width="809" colspan="3" >
<font size="2">Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect the registrant's internal control over financial reporting;
and
</font>	</td>
</tr>
<tr valign="top">
<td width="36" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="261" colspan="3" rowspan="1" >
&nbsp;</td>
<td width="431" colspan="1" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="36" colspan="1" rowspan="1" >
<font size="2">&nbsp;5. </font>	</td>
<td width="692" colspan="4" rowspan="1" >
<font size="2">The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's independent registered public accounting firm and
the audit committee of registrant's board of directors (or persons performing
the equivalent functions):
</font> 	</td>
</tr>
<tr valign="top">
<td width="36" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="261" colspan="3" rowspan="1" >
&nbsp;</td>
<td width="431" colspan="1" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="36" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="38" rowspan="1" >
<font size="2">&nbsp;a) </font>	</td>
<td width="807" colspan="3" >
<font size="2">All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
</font>	</td>
</tr>
<tr valign="top">
<td width="36" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="38" rowspan="1" >
&nbsp;</td>
<td width="162" rowspan="1" >
&nbsp;</td>
<td width="645" colspan="2" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="36" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="38" rowspan="1" >
<font size="2">&nbsp;b) </font>	</td>
<td width="807" colspan="3" >
<font size="2">Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls over financial reporting.
</font>	</td>
</tr>
<tr valign="top">
<td width="36" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="261" colspan="3" rowspan="1" >
&nbsp;</td>
<td width="431" colspan="1" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="36" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="261" colspan="3" rowspan="1" >
&nbsp;</td>
<td width="431" colspan="1" rowspan="1" >
&nbsp;</td>
</tr>
</table></div>
<font size="2">&nbsp;</font><p><font size="2">Date: December 28, 2004 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></p>
<table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%">
  <tr>
    <td width="10%">&nbsp;</td>
    <td width="90%"><font size="2">/s/ KALANI JONES</font></td>
  </tr>
  <tr>
    <td width="10%">&nbsp;</td>
    <td width="90%">&nbsp;</td>
  </tr>
  <tr>
    <td width="10%">&nbsp;</td>
    <td width="90%"><font size="2">Kalani Jones,<br>
    President and Chief Operating Officer<br>
    (Co-Principal Executive Officer) </font></td>
  </tr>
</table>


<p align="center">&nbsp;</p>
<hr size="2" color="#C0C0C0">
<div STYLE="page-break-before: always">&nbsp;</div>
<p>&nbsp;</p>


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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.3
<SEQUENCE>17
<FILENAME>exhibit_313.htm
<TEXT>
<html>
<head><meta content="text/html; charset=iso-8859-1">
<title>Exhibit 31</title>
</head>

<body >
<ul>
</ul>

<p align="right">
<b><font size="2">Exhibit 31.3</font></b><p>
<font size="2">I, Michael A. Russell, certify that: </font> </p>
<div style="position:relative; left: 30">
  <table border=0 cellpadding=0 cellspacing =0 width="718" style="border-collapse: collapse" bordercolor="#111111" >
<tr valign="top">
<td width="35" colspan="1" rowspan="1" >
<p>
<font size="2">1.</font></p>
</td>
<td width="683" colspan="4" rowspan="1" >
<p>
<font size="2">I have reviewed this annual report on Form 10-K of American Technology
Corporation; </font> </p>
</td>
</tr>
<tr valign="top">
<td width="35" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="257" colspan="3" rowspan="1" >
&nbsp;</td>
<td width="426" colspan="1" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="35" colspan="1" rowspan="1" >
<p>
<font size="2">2.</font></p>
</td>
<td width="683" colspan="4" rowspan="1" >
<p>
<font size="2">Based on my knowledge, this 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 report; </font> </p>
</td>
</tr>
<tr valign="top">
<td width="35" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="257" colspan="3" rowspan="1" >
&nbsp;</td>
<td width="426" colspan="1" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="35" colspan="1" rowspan="1" >
<p>
<font size="2">3.</font></p>
</td>
<td width="683" colspan="4" rowspan="1" >
<p>
<font size="2">Based on my knowledge, the financial statements, and other financial information
included in this 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 report; </font> </p>
</td>
</tr>
<tr valign="top">
<td width="35" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="257" colspan="3" rowspan="1" >
&nbsp;</td>
<td width="426" colspan="1" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="35" colspan="1" rowspan="1" >
<p>
<font size="2">4.</font></p>
</td>
<td width="683" colspan="4" rowspan="1" >
<p>
<font size="2">The registrant's other certifying officers 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> </p>
</td>
</tr>
<tr valign="top">
<td width="35" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="257" colspan="3" rowspan="1" >
&nbsp;</td>
<td width="426" colspan="1" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="35" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="44" rowspan="1" >
<p>
<font size="2">a)</font></p>
</td>
<td width="784" colspan="3" >
<p>
<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 report is being prepared; </font> </p>
</td>
</tr>
<tr valign="top">
<td width="35" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="44" rowspan="1" >
&nbsp;</td>
<td width="156" rowspan="1" >
&nbsp;</td>
<td width="628" colspan="2" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="35" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="44" rowspan="1" >
<p>
<font size="2">b)</font></p>
</td>
<td width="784" colspan="3" >
<p>
<font size="2">[paragraph omitted pursuant to SEC Release Nos. 33-2838 and 34-47986]</font></p>
</td>
</tr>
<tr valign="top">
<td width="35" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="44" rowspan="1" >
&nbsp;</td>
<td width="156" rowspan="1" >
&nbsp;</td>
<td width="628" colspan="2" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="35" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="44" rowspan="1" >
<p>
<font size="2">c)</font></p>
</td>
<td width="784" colspan="3" >
<p>
<font size="2">Evaluated the effectiveness of the registrant'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; and</font></p>
</td>
</tr>
<tr valign="top">
<td width="35" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="44" rowspan="1" >
&nbsp;</td>
<td width="156" rowspan="1" >
&nbsp;</td>
<td width="628" colspan="2" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="35" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="44" rowspan="1" >
<p>
<font size="2">d)</font></p>
</td>
<td width="784" colspan="3" >
<p>
<font size="2">Disclosed in this annual report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and</font></p>
</td>
</tr>
<tr valign="top">
<td width="35" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="257" colspan="3" rowspan="1" >
&nbsp;</td>
<td width="426" colspan="1" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="35" colspan="1" rowspan="1" >
<p>
<font size="2">5.</font></p>
</td>
<td width="683" colspan="4" rowspan="1" >
<p>
<font size="2">The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's independent registered public accounting firm and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions): </font> </p>
</td>
</tr>
<tr valign="top">
<td width="35" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="257" colspan="3" rowspan="1" >
&nbsp;</td>
<td width="426" colspan="1" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="35" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="46" rowspan="1" >
<p>
<font size="2">a)</font></p>
</td>
<td width="782" colspan="3" >
<p>
<font size="2">All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process, summarize and
report financial information; and </font> </p>
</td>
</tr>
<tr valign="top">
<td width="35" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="46" rowspan="1" >
&nbsp;</td>
<td width="154" rowspan="1" >
&nbsp;</td>
<td width="628" colspan="2" rowspan="1" >
&nbsp;</td>
</tr>
<tr valign="top">
<td width="35" colspan="1" rowspan="1" >
&nbsp;</td>
<td width="46" rowspan="1" >
<p>
<font size="2">b)</font></p>
</td>
<td width="782" colspan="3" >
<p>
<font size="2">Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant's internal controls over financial
reporting.</font></p>
</td>
</tr>
</table></div>
<p>
<p>
<font size="2">Dated: December 28, 2004</font><table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%">
  <tr>
    <td width="9%">&nbsp;</td>
    <td width="91%">&nbsp;</td>
  </tr>
  <tr>
    <td width="9%">&nbsp;</td>
    <td width="91%"><font size="2">/s/ MICHAEL A. RUSSELL</font></td>
  </tr>
  <tr>
    <td width="9%">&nbsp;</td>
    <td width="91%">&nbsp;</td>
  </tr>
  <tr>
    <td width="9%">&nbsp;</td>
    <td width="91%"><font size="2">Michael A. Russell<br>
    Chief Financial
Officer<br>
    (Principal Financial Officer)</font></td>
  </tr>
</table>
<p>
<font size="2">&nbsp;</font><hr size="2" color="#C0C0C0">
<div STYLE="page-break-before: always">&nbsp;</div>
<p>&nbsp;</p>


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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>18
<FILENAME>exhibit_32.htm
<TEXT>
<html>
<head><meta content="text/html; charset=iso-8859-1">
<title>Exhibit 32</title>
</head>

<body >
<ul>
</ul>

<p align="right">
<b><font size="2">Exhibit 32.1</font></b><p align="center">
<b><font size="2">CERTIFICATION OF CO-PRINCIPAL EXECUTIVE OFFICERS AND PRINCIPAL FINANCIAL
OFFICER</font></b><font size="2"><br><b>PURSUANT TO</b><br><b>18 U.S.C. SECTION 1350,</b><br><b>AS
ADOPTED PURSUANT TO</b><br></font><b><font size="2">SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002</font></b><p>
<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
capacity as an officer of American Technology Corporation (the "Company"), that,
to his knowledge, the Annual Report of the Company on Form 10-K for the fiscal
ended September 30, 2004 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>
&nbsp;<p>
<font size="2">Dated: December 28, 2004</font><p>
&nbsp;<p>
<font size="2">/s/ ELWOOD G. NORRIS</font><table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%">
  <tr>
    <td width="6%">&nbsp;</td>
    <td width="94%">&nbsp;</td>
  </tr>
  <tr>
    <td width="6%">&nbsp;</td>
    <td width="94%"><font size="2">Elwood G. Norris, <br>
    Chairman of the
Board<br>
    (Co-Principal Executive Officer)</font></td>
  </tr>
</table>
<p>
<font size="2">Dated: December 28, 2004</font><p>
<font size="2">/s/ KALANI JONES</font><table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%">
  <tr>
    <td width="7%">&nbsp;</td>
    <td width="93%">&nbsp;</td>
  </tr>
  <tr>
    <td width="7%">&nbsp;</td>
    <td width="93%"><font size="2">Kalani Jones, <br>
    President and Chief
Operating Officer<br>
    (Co-Principal Executive Officer)</font></td>
  </tr>
</table>
<p>
&nbsp;<p>
<font size="2">Dated: December 28, 2004</font><p>
<font size="2">/s/ MICHAEL A. RUSSELL</font><table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%">
  <tr>
    <td width="8%">&nbsp;</td>
    <td width="92%">&nbsp;</td>
  </tr>
  <tr>
    <td width="8%">&nbsp;</td>
    <td width="92%"><font size="2">Michael A. Russell<br>
    Chief Financial
Officer<br>
    (Principal Financial Officer)</font></td>
  </tr>
</table>
<p>
<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></p>


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</DOCUMENT>
</SEC-DOCUMENT>
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