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<SEC-DOCUMENT>0001104659-02-005340.txt : 20021108
<SEC-HEADER>0001104659-02-005340.hdr.sgml : 20021108
<ACCEPTANCE-DATETIME>20021107175924
ACCESSION NUMBER:		0001104659-02-005340
CONFORMED SUBMISSION TYPE:	10QSB
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20020930
FILED AS OF DATE:		20021108

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			PRECISION OPTICS CORPORATION INC
		CENTRAL INDEX KEY:			0000867840
		STANDARD INDUSTRIAL CLASSIFICATION:	ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845]
		IRS NUMBER:				042795294
		STATE OF INCORPORATION:			MA
		FISCAL YEAR END:			0630

	FILING VALUES:
		FORM TYPE:		10QSB
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-10647
		FILM NUMBER:		02813145

	BUSINESS ADDRESS:	
		STREET 1:		22 EAST BROADWAY
		CITY:			GARDNER
		STATE:			MA
		ZIP:			01440-3338
		BUSINESS PHONE:		9786301800

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	PRECISION OPTICS CORP INC
		DATE OF NAME CHANGE:	19600201
</SEC-HEADER>
<DOCUMENT>
<TYPE>10QSB
<SEQUENCE>1
<FILENAME>j5575_10qsb.htm
<DESCRIPTION>10QSB
<TEXT>
<html>



<head>



<title>  </title>



</head>



<body link="blue" vlink="purple">



<div style="font-family:'Times New Roman';">



<div style="border:none;border-top:double windowtext 9.0pt;padding:0in 0in 0in 0in;">



<p style="border:none;margin:0in 0in .0001pt;padding:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



</div>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="5" face="Times New Roman" style="font-size:18.0pt;font-weight:bold;">FORM 10-QSB</font></b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="5" face="Times New Roman" style="font-size:18.0pt;font-weight:bold;">U.S. SECURITIES AND EXCHANGE

COMMISSION</font></b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Washington, DC 20549</font></b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="3" face="Wingdings" style="font-family:Wingdings;font-size:12.0pt;font-weight:bold;">&#253;</font></b><b><font size="3" style="font-size:12.0pt;font-weight:bold;">&#160; QUARTERLY REPORT

PURSUANT TO SECTION 13 OR 15(d)<br>

OF THE SECURITIES EXCHANGE ACT OF 1934</font></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">For

the quarterly period ended September 30, 2002</font></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Commission

file number&#160; 001-10647</font></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="5" face="Times New Roman" style="font-size:18.0pt;font-weight:bold;">PRECISION OPTICS CORPORATION, INC.</font></b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(Exact name of small business issuer as specified in its charter)</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<div align="center">



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="48%" valign="top" style="padding:0in 0in 0in 0in;width:48.66%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Massachusetts</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.7%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="48%" valign="top" style="padding:0in 0in 0in 0in;width:48.64%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">04-2795294</font></b></p>

  </td>

 </tr>

 <tr>

  <td width="48%" valign="top" style="padding:0in 0in 0in 0in;width:48.66%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(State or other jurisdiction of<br>

  incorporation or organization)</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.7%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="48%" valign="top" style="padding:0in 0in 0in 0in;width:48.64%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(I.R.S. Employer<br>

  Identification No.)</font></p>

  </td>

 </tr>

 <tr>

  <td width="48%" valign="top" style="padding:0in 0in 0in 0in;width:48.66%;">

  <p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.7%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="48%" valign="top" style="padding:0in 0in 0in 0in;width:48.64%;">

  <p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="100%" colspan="3" valign="top" style="padding:0in 0in 0in 0in;width:100.0%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">22 East Broadway, Gardner, Massachusetts

  01440-3338</font></b></p>

  </td>

 </tr>

 <tr>

  <td width="100%" colspan="3" valign="top" style="padding:0in 0in 0in 0in;width:100.0%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(Address of principal executive offices)&#160;&#160;&#160;&#160;&#160; (Zip Code)</font></p>

  </td>

 </tr>

 <tr>

  <td width="48%" valign="top" style="padding:0in 0in 0in 0in;width:48.66%;">

  <p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.7%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="48%" valign="top" style="padding:0in 0in 0in 0in;width:48.64%;">

  <p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="100%" colspan="3" valign="top" style="padding:0in 0in 0in 0in;width:100.0%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">(978) 630-1800</font></b></p>

  </td>

 </tr>

 <tr>

  <td width="100%" colspan="3" valign="top" style="padding:0in 0in 0in 0in;width:100.0%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(Issuer&#146;s telephone number, including area code)</font></p>

  </td>

 </tr>

</table>



</div>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Check whether the issuer (1)

filed all reports required to be filed by Section 13 or 15(d) of the Securities

Exchange Act of 1934 during the past 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.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Yes&#160; </font><font face="Wingdings" style="font-family:Wingdings;">&#253;</font>&#160;&#160;&#160;&#160; No&#160;

<font face="Wingdings" style="font-family:Wingdings;">o</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The number of shares

outstanding of issuer&#146;s common stock, par value $.01 per share, at September

30, 2002 was 10,503,908 shares.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Transitional Small Business

Disclosure Format (check one):</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Yes&#160; </font><font face="Wingdings" style="font-family:Wingdings;">o</font>&#160;&#160;&#160;&#160; No&#160;

<font face="Wingdings" style="font-family:Wingdings;">&#253;</font></p>



<div style="border:none;border-bottom:double windowtext 9.0pt;padding:0in 0in 0in 0in;">



<p style="border:none;margin:0in 0in .0001pt;padding:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



</div>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
<!-- SEQ.=1,FOLIO='',FILE='C:\C2\rfossie\5575_4\t_872268\j5575_10qsb.htm',USER='rfossie',CD='Nov  7 16:34 2002' -->
<br clear="all" style="page-break-before:always;">

</font>



<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">PRECISION OPTICS

CORPORATION, INC. AND SUBSIDIARIES</font></b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">INDEX</font></u></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="10%" valign="top" style="padding:0in 0in 0in 0in;width:10.24%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">PART I.</font></p>

  </td>

  <td width="89%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:89.76%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">FINANCIAL

  INFORMATION:</font></p>

  </td>

 </tr>

 <tr>

  <td width="10%" valign="top" style="padding:0in 0in 0in 0in;width:10.24%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="89%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:89.76%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="10%" valign="top" style="padding:0in 0in 0in 0in;width:10.24%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Item 1</font></p>

  </td>

  <td width="89%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:89.76%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Consolidated

  Financial Statements</font></p>

  </td>

 </tr>

 <tr>

  <td width="10%" valign="top" style="padding:0in 0in 0in 0in;width:10.24%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="89%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:89.76%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="10%" valign="top" style="padding:0in 0in 0in 0in;width:10.24%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="89%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:89.76%;">

  <p style="margin:0in 0in .0001pt .3in;text-indent:-.3in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#ConsolidatedBalanceSheets" title="Click to goto CONSOLIDATED BALANCE SHEETS">Consolidated Balance Sheets -<br>

  September 30, 2002 (unaudited)<br>

  and June 30, 2002</a></font></p>

  </td>

 </tr>

 <tr>

  <td width="10%" valign="top" style="padding:0in 0in 0in 0in;width:10.24%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="89%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:89.76%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="10%" valign="top" style="padding:0in 0in 0in 0in;width:10.24%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="89%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:89.76%;">

  <p style="margin:0in 0in .0001pt .3in;text-indent:-.3in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#ConsolidatedStatementsOfOperations" title="Click to goto CONSOLIDATED STATEMENTS OF OPERATIONS">Consolidated Statements of Operations -<br>

  Three Months Ended September 30, 2002<br>

  and September 30, 2001 (unaudited)</a></font></p>

  </td>

 </tr>

 <tr>

  <td width="10%" valign="top" style="padding:0in 0in 0in 0in;width:10.24%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="89%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:89.76%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="10%" valign="top" style="padding:0in 0in 0in 0in;width:10.24%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="89%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:89.76%;">

  <p style="margin:0in 0in .0001pt .3in;text-indent:-.3in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#ConsolidatedStatementsOfCashFlows" title="Click to goto CONSOLIDATED STATEMENTS OF CASH FLOWS">Consolidated Statements of Cash Flows -<br>

  Three Months Ended September 30, 2002<br>

  and September 30, 2001 (unaudited)</a></font></p>

  </td>

 </tr>

 <tr>

  <td width="10%" valign="top" style="padding:0in 0in 0in 0in;width:10.24%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="89%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:89.76%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="10%" valign="top" style="padding:0in 0in 0in 0in;width:10.24%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="89%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:89.76%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#NotesToConsolidatedFinancialStatemen" title="Click to goto NOTES TO CONSOLIDATED FINANCIAL STATEMENTS">Notes to Consolidated Financial Statements</a></font></p>

  </td>

 </tr>

 <tr>

  <td width="10%" valign="top" style="padding:0in 0in 0in 0in;width:10.24%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="89%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:89.76%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="10%" valign="top" style="padding:0in 0in 0in 0in;width:10.24%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#ManagementsDiscussionAndAnalysisOf" title="Click to goto Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations">Item 2</a></font></p>

  </td>

  <td width="89%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:89.76%;">

  <p style="margin:0in 0in .0001pt .3in;text-indent:-.3in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#ManagementsDiscussionAndAnalysisOf" title="Click to goto Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations">Management&#146;s Discussion and Analysis of<br>

  Financial Condition and Results of Operations</a></font></p>

  </td>

 </tr>

 <tr>

  <td width="10%" valign="top" style="padding:0in 0in 0in 0in;width:10.24%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="89%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:89.76%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="10%" valign="top" style="padding:0in 0in 0in 0in;width:10.24%;">

  <p style="margin:0in 0in .0001pt;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#Item3ControlsAndProcedures" title="Click to goto Item 3 Controls and Procedures">Item 3</a></font></u></p>

  </td>

  <td width="89%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:89.76%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#Item3ControlsAndProcedures" title="Click to goto Item 3 Controls and Procedures">Controls and Procedures</a></font></p>

  </td>

 </tr>

 <tr>

  <td width="10%" valign="top" style="padding:0in 0in 0in 0in;width:10.24%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="89%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:89.76%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="10%" valign="top" style="padding:0in 0in 0in 0in;width:10.24%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#PartIi_OtherInformation" title="Click to goto PART II. OTHER INFORMATION">PART II.</a></font></p>

  </td>

  <td width="89%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:89.76%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#PartIi_OtherInformation" title="Click to goto PART II. OTHER INFORMATION">OTHER INFORMATION</a></font></p>

  </td>

 </tr>

 <tr>

  <td width="10%" valign="top" style="padding:0in 0in 0in 0in;width:10.24%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="89%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:89.76%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="10%" valign="top" style="padding:0in 0in 0in 0in;width:10.24%;">

  <p style="margin:0in 0in .0001pt;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#Items15NotApplicable_" title="Click to goto Items 1-5 Not Applicable.">Items 1-5</a></font></u></p>

  </td>

  <td width="89%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:89.76%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#Items15NotApplicable_" title="Click to goto Items 1-5 Not Applicable.">Not Applicable</a></font></p>

  </td>

 </tr>

 <tr>

  <td width="10%" valign="top" style="padding:0in 0in 0in 0in;width:10.24%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="89%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:89.76%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="10%" valign="top" style="padding:0in 0in 0in 0in;width:10.24%;">

  <p style="margin:0in 0in .0001pt;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#Item6ExhibitsAndReportsOnForm8k" title="Click to goto Item 6 Exhibits and Reports on Form 8-K">Item 6</a></font></u></p>

  </td>

  <td width="89%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:89.76%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#Item6ExhibitsAndReportsOnForm8k" title="Click to goto Item 6 Exhibits and Reports on Form 8-K">Exhibits and Reports on Form 8-K</a></font></p>

  </td>

 </tr>

 <tr>

  <td width="10%" valign="top" style="padding:0in 0in 0in 0in;width:10.24%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="89%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:89.76%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="10%" valign="top" style="padding:0in 0in 0in 0in;width:10.24%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="3%" valign="top" style="padding:0in 0in 0in 0in;width:3.7%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="86%" valign="top" style="padding:0in 0in 0in 0in;width:86.06%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#AExhibitsExhibit99Certificatio" title="Click to goto (a) Exhibits &#150; Exhibit 99 &#150; Certification of Quarterly Report">(a)&#160;

  Exhibits &#150; Exhibit 99 &#150; Certification of Quarterly Report</a></font></p>

  </td>

 </tr>

 <tr>

  <td width="10%" valign="top" style="padding:0in 0in 0in 0in;width:10.24%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="3%" valign="top" style="padding:0in 0in 0in 0in;width:3.7%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="86%" valign="top" style="padding:0in 0in 0in 0in;width:86.06%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="10%" valign="top" style="padding:0in 0in 0in 0in;width:10.24%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="3%" valign="top" style="padding:0in 0in 0in 0in;width:3.7%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="86%" valign="top" style="padding:0in 0in 0in 0in;width:86.06%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#BReportsOnForm8k" title="Click to goto (b) Reports on Form 8-K">(b)&#160; Reports on Form 8-K</a></font></p>

  </td>

 </tr>

</table>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">PRECISION

OPTICS CORPORATION, INC. AND SUBSIDIARIES</font></b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><a name="ConsolidatedBalanceSheets"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">CONSOLIDATED BALANCE SHEETS</font></b></a></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="64%" valign="bottom" style="padding:0in 0in 0in 0in;width:64.84%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt 10.0pt;text-align:center;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:15.46%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">September

  30, 2002</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="14%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:14.5%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">June 30,

  2002</font></b></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.04%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="bottom" style="padding:0in 0in 0in 0in;width:64.84%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt 10.0pt;text-align:center;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:15.46%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">(Unaudited)</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="14%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:14.5%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.04%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:64.84%;">

  <p align="center" style="margin:0in 0in .0001pt 10.0pt;text-align:center;text-indent:-10.0pt;"><b><u><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">ASSETS</font></u></b></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:15.46%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="14%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:14.5%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.04%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">CURRENT ASSETS</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Cash and Cash Equivalents</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="14%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:14.16%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5,089,486</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="13%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:13.2%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5,825,601</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Accounts Receivable, Net</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">304,199</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">374,499</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Inventories</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1,081,601</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1,009,009</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Prepaid Expenses</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">298,732</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">93,574</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Refundable Income Taxes</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">13,849</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">13,849</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Assets Held for Sale</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">839,810</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">847,696</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 70.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Total Current Assets</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7,627,677</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8,164,228</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">PROPERTY AND EQUIPMENT</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3,995,563</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3,983,698</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Less:&#160;&#160;&#160;

  Accumulated Depreciation</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(3,547,213</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(3,492,403</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 70.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Net Property and Equipment</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">448,350</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">491,295</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">OTHER ASSETS</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">216,024</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">224,516</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">TOTAL ASSETS</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="14%" valign="bottom" style="border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in 0in 0in 0in;width:14.16%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8,292,051</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="13%" valign="bottom" style="border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in 0in 0in 0in;width:13.2%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8,880,039</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:64.84%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.84%;">

  <p align="center" style="margin:0in 0in .0001pt 10.0pt;text-align:center;text-indent:-10.0pt;"><b><u><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">LIABILITIES AND STOCKHOLDERS&#146; EQUITY</font></u></b></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">CURRENT LIABILITIES</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Current Portion of Capital Lease Obligation</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="14%" valign="bottom" style="padding:0in 0in 0in 0in;width:14.16%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">20,503</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="13%" valign="bottom" style="padding:0in 0in 0in 0in;width:13.2%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">33,544</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Customer Advances</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">73,500</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">30,000</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Accounts Payable</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">401,687</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">118,901</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Accrued Payroll</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">124,578</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">63,650</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Accrued Bonuses</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">43,750</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">30,000</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Accrued Professional Services</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">109,954</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">105,995</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Accrued Vacation</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">97,941</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">121,042</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Accrued Warranty Expense</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">50,000</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">50,000</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Accrued Income Taxes</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#151;</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">912</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Other Accrued Liabilities</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">37,191</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">24,509</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Accrued Restructuring Expense</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#151;</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">167,971</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 70.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Total Current Liabilities</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">959,104</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">746,524</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.84%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">CAPITAL LEASE OBLIGATION, Net of Current</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 20.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Portion, AND OTHER</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9,028</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">17,705</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">STOCKHOLDERS&#146; EQUITY</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Common Stock, $.01 par value-<br>

  Authorized &#151; 20,000,000 shares<br>

  Issued and Outstanding &#150; 10,503,908 shares<br>&#160; at September 30, 2002 and June 30,

  2002</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">105,039</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">105,039</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Additional Paid-in Capital</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">27,682,657</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">27,682,657</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Accumulated Deficit</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(20,463,777</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(19,671,886</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 70.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Total Stockholders&#146; Equity</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:15.46%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7,323,919</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="14%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:14.5%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8,115,810</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.84%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">TOTAL LIABILITIES AND STOCKHOLDERS&#146; EQUITY</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="14%" valign="bottom" style="border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in 0in 0in 0in;width:14.16%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8,292,051</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="13%" valign="bottom" style="border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in 0in 0in 0in;width:13.2%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8,880,039</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.04%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

</table>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
<!-- SEQ.=1,FOLIO='3',FILE='C:\C2\rfossie\5575_4\t_872268\j5575_10qsb.htm',USER='rfossie',CD='Nov  7 16:34 2002' -->
<br clear="all" style="page-break-before:always;">

</font>



<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">PRECISION OPTICS

CORPORATION, INC. AND SUBSIDIARIES</font></b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><a name="ConsolidatedStatementsOfOperations"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">CONSOLIDATED

STATEMENTS OF OPERATIONS</font></b></a></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">FOR THE THREE MONTHS

ENDED</font></b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">SEPTEMBER 30, 2002

AND SEPTEMBER 30, 2001</font></b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">(UNAUDITED)</font></b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt 10.0pt;text-align:center;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">2002</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">2001</font></b></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">REVENUES</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="10%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:10.7%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">542,443</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="10%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:10.7%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">491,096</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">COST OF GOODS SOLD</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">531,738</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1,496,184</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Gross Profit (Loss)</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">10,705</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(1,005,088</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">RESEARCH and DEVELOPMENT EXPENSES</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">310,056</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">675,710</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SELLING, GENERAL AND ADMINISTRATIVE

  EXPENSES</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">502,229</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">469,109</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">PROVISION FOR ASSET IMPAIRMENT</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#151;</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3,444,378</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Total Operating Expenses</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">812,285</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4,589,197</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Operating Loss</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(801,580</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(5,594,285</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">INTEREST INCOME</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">21,366</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">90,284</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">INTEREST EXPENSE</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(6,238</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(1,928</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">LOSS ON SALE OF ASSETS HELD FOR SALE</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(5,439</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#151;</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 20.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Net Loss</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="10%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:10.7%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(791,891</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="10%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:10.7%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(5,505,929</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Basic and Diluted Loss Per Share</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="10%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:10.7%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(0.08</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="10%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:10.7%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(0.52</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Weighted Average Common Shares Outstanding</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">10,503,908</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">10,503,908</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

</table>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
<!-- SEQ.=1,FOLIO='4',FILE='C:\C2\rfossie\5575_4\t_872268\j5575_10qsb.htm',USER='rfossie',CD='Nov  7 16:34 2002' -->
<br clear="all" style="page-break-before:always;">

</font>



<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">PRECISION OPTICS

CORPORATION, INC. AND SUBSIDIARIES</font></b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><a name="ConsolidatedStatementsOfCashFlows"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">CONSOLIDATED STATEMENTS OF CASH FLOWS</font></b></a></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">FOR THE THREE MONTHS ENDED</font></b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">SEPTEMBER 30, 2002 AND SEPTEMBER 30, 2001</font></b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">(UNAUDITED)</font></b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">&nbsp;</font></b></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt 10.0pt;text-align:center;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">2002</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">2001</font></b></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">CASH FLOWS FROM OPERATING ACTIVITIES:</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Net Loss</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="10%" valign="bottom" style="padding:0in 0in 0in 0in;width:10.7%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(791,891</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="10%" valign="bottom" style="padding:0in 0in 0in 0in;width:10.7%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(5,505,929</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Adjustments to Reconcile Net Loss to Net

  Cash Used In Operating Activities -</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 60.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Depreciation and Amortization</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">64,502</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">140,666</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 60.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Provision for Asset Impairment</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#151;</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3,444,378</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 60.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Provision for Inventory Writedown</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#151;</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">540,000</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 60.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Loss on Sale of Assets Held for Sale</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5,439</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#151;</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 60.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Other</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(6,872</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(17,738</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 60.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Changes in Operating Assets and

  Liabilities-</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 70.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Accounts Receivable, Net</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">70,300</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">750,699</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 70.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Inventories</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(72,592</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(164,158</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 70.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Prepaid Expenses</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(205,158</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(191,820</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 70.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Accounts Payable</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">282,786</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(423,358</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 70.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Accrued Restructuring Expense</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(167,971</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#151;</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 70.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Customer Advances</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">43,500</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#151;</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 70.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Other Accrued Expenses</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">65,753</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(3,240</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 70.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Net Cash Used In Operating Activities</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(712,204</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(1,430,500</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">CASH FLOWS FROM INVESTING ACTIVITIES:</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Purchases of Property and Equipment</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(15,619</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(32,199</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Net Proceeds from Sale of Assets Held for

  Sale</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5,000</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#151;</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Increase in Other Assets</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#151;</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(5,063</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 50.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Net Cash Used in Investing Activities</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(10,619</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(37,262</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">CASH FLOWS FROM FINANCING ACTIVITIES:</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Repayment of Capital Lease Obligation</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(13,292</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(12,467</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 50.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Net Cash Used In Financing Activities</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(13,292</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(12,467</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 50.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">NET DECREASE IN CASH AND CASH EQUIVALENTS</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(736,115</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(1,480,229</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">CASH AND CASH EQUIVALENTS AT BEGINNING OF

  PERIOD</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5,825,601</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">10,530,298</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">CASH AND CASH EQUIVALENTS AT END OF PERIOD</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="10%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:10.7%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5,089,486</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="10%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:10.7%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9,050,069</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SUPPLEMENTAL DISCLOSURE OF CASH FLOW

  INFORMATION:</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Cash Paid for-</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" style="padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Interest</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="10%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:10.7%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6,238</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="10%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:10.7%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1,928</font></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="71%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">

  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Income Taxes</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="10%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:10.7%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1,824</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="10%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:10.7%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">912</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

</table>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
<!-- SEQ.=1,FOLIO='5',FILE='C:\C2\rfossie\5575_4\t_872268\j5575_10qsb.htm',USER='rfossie',CD='Nov  7 16:34 2002' -->
<br clear="all" style="page-break-before:always;">

</font>



<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">PRECISION OPTICS CORPORATION, INC.</font></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><a name="NotesToConsolidatedFinancialStatemen"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</font></b></a></p>



<p style="margin:0in 0in .0001pt 27.0pt;text-indent:-27.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt 27.35pt;text-indent:-27.35pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES</u></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt 27.35pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The accompanying consolidated financial statements include the accounts

of Precision Optics Corporation, Inc. and its wholly-owned subsidiaries.&#160; All significant intercompany accounts and

transactions have been eliminated in consolidation.</font></p>



<p style="margin:0in 0in .0001pt 27.35pt;text-indent:-27.35pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt 27.35pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">These financial statements have been prepared by the Company, without

audit, and reflect normal recurring adjustments which, in the opinion of

management, are necessary for a fair statement of the results of the first

quarter of the Company&#146;s fiscal year 2003.&#160;

These financial statements do not include all disclosures associated

with annual consolidated financial statements and, accordingly, should be read

in conjunction with footnotes contained in the Company&#146;s consolidated financial

statements for the year ended June 30, 2002 together with the auditors&#146; report

filed under cover of the Company&#146;s 2002 Annual Report on Form 10-KSB.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt 27.35pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Basic loss per share is computed by dividing net loss by the weighted

average number of shares of common stock outstanding during the period.&#160; For the three months ended September 30,

2002 and 2001, the effect of stock options and warrants was antidilutive;

therefore, they were not included in the computation of diluted loss per

share.&#160; The number of shares issuable

upon the exercise of outstanding stock options and warrants that were excluded

from the computation as their effect would be antidilutive were 1,209,198 and

1,260,098, for the three months ended September 30, 2002 and 2001,

respectively.</font></p>



<p style="margin:0in 0in .0001pt 27.0pt;text-indent:-27.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt 27.35pt;text-indent:-27.35pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>INVENTORIES</u></p>



<p style="margin:0in 0in .0001pt 27.35pt;text-indent:-27.35pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt 27.35pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Inventories are stated at the lower of cost (first-in, first-out) or

market and consist of the following:</font></p>



<p style="margin:0in 0in .0001pt 27.0pt;text-indent:-27.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="85%" style="border-collapse:collapse;margin-left:.8in;width:85.02%;">

 <tr>

  <td width="61%" valign="bottom" style="padding:0in 0in 0in 0in;width:61.54%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt 10.0pt;text-align:center;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.1%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="17%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:17.58%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">September

  30, 2002</font></b></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.98%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:15.54%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">June 30,

  2002</font></b></p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.26%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="61%" valign="top" style="padding:0in 0in 0in 0in;width:61.54%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.1%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="17%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:17.58%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.98%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:15.54%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.26%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="61%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:61.54%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Raw Materials</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.1%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.38%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="16%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:16.2%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">567,066</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.98%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="14%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:14.24%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">532,228</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.26%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="61%" valign="top" style="padding:0in 0in 0in 0in;width:61.54%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.1%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="17%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:17.58%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.98%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:15.54%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.26%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="61%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:61.54%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Work-In-Progress</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.1%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="17%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:17.58%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">331,270</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.98%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="15%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:15.54%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">302,128</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.26%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="61%" valign="top" style="padding:0in 0in 0in 0in;width:61.54%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.1%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="17%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:17.58%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.98%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:15.54%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.26%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="61%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:61.54%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Finished Goods</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.1%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="17%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:17.58%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">183,265</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.98%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="15%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:15.54%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">174,653</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.26%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="61%" valign="top" style="padding:0in 0in 0in 0in;width:61.54%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.1%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="17%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:17.58%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.98%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:15.54%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.26%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="61%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:61.54%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Total Inventories</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.1%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.38%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="16%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:16.2%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1,081,601</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.98%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="14%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:14.24%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1,009,009</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.26%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

</table>



<p style="margin:0in 0in .0001pt 27.0pt;text-indent:-27.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt 27.35pt;text-indent:-27.35pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>WORKFORCE REDUCTION</u></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt 27.35pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In October 2002, the Company reduced its full-time workforce by

approximately 16%, or six employees.&#160; As

a result of this action, the Company expects to record a non-recurring pretax

charge to earnings of approximately $53,000 for employee severance benefits in

the quarter ending December 31, 2002.</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">PRECISION OPTICS

CORPORATION, INC. AND SUBSIDIARIES</font></b></p>



<p align="center" style="margin:0in 0in .0001pt 27.0pt;text-align:center;text-indent:-27.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt 27.0pt;text-align:center;text-indent:-27.0pt;"><a name="ManagementsDiscussionAndAnalysisOf"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Management&#146;s Discussion and Analysis of

Financial</font></b></a></p>



<p align="center" style="margin:0in 0in .0001pt 27.0pt;text-align:center;text-indent:-27.0pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Condition

and Results of Operations</font></b></p>



<p align="center" style="margin:0in 0in .0001pt 27.0pt;text-align:center;text-indent:-27.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt 27.0pt;text-indent:-27.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt 27.35pt;text-indent:-27.35pt;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">Important Factors Regarding Forward-Looking

Statements</font></u></p>



<p style="margin:0in 0in .0001pt 27.35pt;text-indent:-27.35pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">When used in this discussion,

the words &#147;believes&#148;, &#147;anticipates&#148;, &#147;intends to&#148;, and similar expressions are

intended to identify forward-looking statements.&#160; Such statements are subject to certain risks and uncertainties

which could cause actual results to differ materially from those

projected.&#160; These risks and

uncertainties, many of which are not within the Company&#146;s control, include, but

are not limited to, uncertainty of future demand for the Company&#146;s products,

the uncertainty and timing of the successful development of the Company&#146;s new

products, the risks associated with reliance on a few key customers; the

Company&#146;s ability to regain and maintain compliance with requirements for

continued listing on the Nasdaq SmallCap Market; the Company&#146;s ability to

attract and retain personnel with the necessary scientific and technical

skills; the timing and completion of significant orders; the timing and amount

of the Company&#146;s research and development expenditures; the timing and level of

market acceptance of customers&#146; products for which the Company supplies

components; the level of market acceptance of competitors&#146; products; the

ability of the Company to control costs associated with performance under fixed

price contracts; the performance and reliability of the Company&#146;s vendors; and

the continued availability to the Company of essential supplies, materials and

services.&#160; Readers are cautioned not to

place undue reliance on these forward-looking statements, which speak only as

of the date hereof.&#160; The Company

undertakes no obligation to publicly release the result of any revision to

these forward-looking statements which may be made to reflect events or

circumstances after the date hereof or to reflect the occurrence of

unanticipated events.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">Critical Accounting Policies and Estimates</font></u></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">General</font></i></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Management&#146;s

discussion and analysis of financial condition and results of operations are

based upon the Company&#146;s consolidated financial statements, which have been

prepared in accordance with accounting principles generally accepted in the

United States of America (&#147;U.S. GAAP&#148;).&#160;

The preparation of these financial statements requires the Company to

make estimates and judgments that affect the reported amounts of assets, liabilities,

revenues and expenses.&#160; The Company

bases its estimates on historical experience and on various other assumptions

that are believed to be reasonable under the circumstances, the results of

which form the basis for making judgments about the carrying values of assets

and liabilities that are not readily apparent from other sources.&#160; Actual results may differ from these

estimates under different assumptions or conditions.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The

Company believes the following critical accounting policies affect its more

significant judgments and estimates used in the preparation of its consolidated

financial statements.</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">Revenue Recognition</font></i></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The

Company recognizes revenue in accordance with U.S. GAAP and SEC Staff

Accounting Bulletin (&#147;SAB&#148;) No. 101, <i><font style="font-style:italic;">Revenue

Recognition in Financial Statements.&#160; </font></i>SAB

No. 101 requires that four basic criteria must be met before revenue can be

recognized:&#160; (1) persuasive evidence of

an arrangement exists; (2) delivery has occurred or services rendered; (3) the

price to the buyer is fixed and determinable; and (4) collectibility is

reasonably assured.&#160; Determination of

criteria (3) and (4) are based on management&#146;s judgments regarding the fixed

nature of the price to the buyer charged for products delivered or services

rendered and collectibility of the sales price.&#160; The Company assesses credit worthiness of customers based upon

prior history with the customer and assessment of financial condition.&#160; The Company&#146;s shipping terms are customarily

FOB shipping point.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">Bad Debt</font></i></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company

maintains allowances for doubtful accounts for estimated losses resulting from

the inability of its customers to make required payments.&#160; Allowances for doubtful accounts are

established based upon review of specific account balances and historical

experience.&#160; If the financial condition

of the Company&#146;s customers were to deteriorate, resulting in an impairment of

their ability to make future payments, additional allowances may be required.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">Inventories</font></i></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The

Company provides for estimated obsolescence on unmarketable inventory based

upon assumptions about future demand and market conditions.&#160; If actual demand and market conditions are

less favorable than those projected by management, additional inventory write

downs may be required.&#160;&#160; Inventory, once

written down, is not subsequently written back up, as these adjustments are

considered permanent adjustments to the carrying value of the inventory.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">Impairment of Long-Lived Assets and

Long-Lived Assets to be Disposed of</font></i></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">On July

1, 2002, the Company adopted Statement of Financial Accounting Standards

(&#147;SFAS&#148;) No. 144, <i><font style="font-style:italic;">Accounting for the

Impairment or Disposal of Long-Lived Assets.&#160;

</font></i>SFAS No. 144 supercedes SFAS No. 121, <i><font style="font-style:italic;">Accounting for the Impairment of Long-Lived Assets

and for Long-Lived Assets to be Disposed of</font></i>.&#160; This statement requires that long-lived

assets and certain identifiable intangibles be reviewed for impairment whenever

events or changes in circumstances indicate that the carrying amount of an

asset may not be recoverable.&#160;

Recoverability of assets to be held and used is measured by a comparison

of the carrying amount of an asset to undiscounted future net cash flows

expected to be generated by the asset.&#160;

If such assets are considered to be impaired, the impairment to be

recognized is measured by the amount by which the carrying amount of the assets

exceeds the fair value of the assets.&#160;

Assets to be disposed of through sale are reported at the lower of the

carrying amount or fair value less estimated costs to sell.</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p style="margin:0in 0in .0001pt;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">Results of

Operations</font></u></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Total revenues for the three

months ended September 30, 2002 (the first quarter of fiscal year 2003)

increased by approximately $51,000, or 10.5%, from the same period in the prior

year.&#160; The increase was due primarily to

higher sales of medical products (up by approximately&#160; $204,000, or 69%), partially offset by lower sales of non-medical

products (down by approximately $153,000, or 79%).&#160; Sales of medical products were higher due primarily to higher

shipments of stereo endoscopes and cameras.&#160;

Non-medical sales were lower due primarily to the discontinuation of

sales of Dense Wavelength Division Multiplexer (DWDM) filters.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Revenues from

the Company&#146;s largest customers, as a percentage of total revenues for the

three months ended September 30, 2002 and 2001, were as follows:</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<div align="center">



<table border="0" cellspacing="0" cellpadding="0" width="60%" style="border-collapse:collapse;width:60.0%;">

 <tr>

  <td width="70%" valign="bottom" style="padding:0in 0in 0in 0in;width:70.98%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt 10.0pt;page-break-after:avoid;text-align:center;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="12%" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="center" style="margin:0in 0in .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">2002</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="12%" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="center" style="margin:0in 0in .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">2001</font></b></p>

  </td>

  <td width="50%" valign="bottom" style="padding:0in 0in 0in 0in;width:50.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="70%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:70.98%;">

  <p style="margin:0in 0in .0001pt 10.0pt;page-break-after:avoid;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Customer A</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="12%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">22</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#151;</font></p>

  </td>

  <td width="50%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:50.0%;">

  <p style="margin:0in 0in .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="70%" valign="top" style="padding:0in 0in 0in 0in;width:70.98%;">

  <p style="margin:0in 0in .0001pt 10.0pt;page-break-after:avoid;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Customer B</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="12%" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">20</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5</font></p>

  </td>

  <td width="50%" valign="bottom" style="padding:0in 0in 0in 0in;width:50.0%;">

  <p style="margin:0in 0in .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="70%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:70.98%;">

  <p style="margin:0in 0in .0001pt 10.0pt;page-break-after:avoid;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Customer C</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="12%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">16</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">16</font></p>

  </td>

  <td width="50%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:50.0%;">

  <p style="margin:0in 0in .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="70%" valign="top" style="padding:0in 0in 0in 0in;width:70.98%;">

  <p style="margin:0in 0in .0001pt 10.0pt;page-break-after:avoid;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Customer D</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="12%" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">19</font></p>

  </td>

  <td width="50%" valign="bottom" style="padding:0in 0in 0in 0in;width:50.0%;">

  <p style="margin:0in 0in .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="70%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:70.98%;">

  <p style="margin:0in 0in .0001pt 10.0pt;page-break-after:avoid;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Customer E</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="12%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">12</font></p>

  </td>

  <td width="50%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:50.0%;">

  <p style="margin:0in 0in .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="70%" valign="top" style="padding:0in 0in 0in 0in;width:70.98%;">

  <p style="margin:0in 0in .0001pt 10.0pt;page-break-after:avoid;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Customer F</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="12%" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#151;</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">21</font></p>

  </td>

  <td width="50%" valign="bottom" style="padding:0in 0in 0in 0in;width:50.0%;">

  <p style="margin:0in 0in .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="70%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:70.98%;">

  <p style="margin:0in 0in .0001pt 10.0pt;page-break-after:avoid;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">All Others</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="12%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">33</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">27</font></p>

  </td>

  <td width="50%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:50.0%;">

  <p style="margin:0in 0in .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="70%" valign="top" style="padding:0in 0in 0in 0in;width:70.98%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt 10.0pt;page-break-after:avoid;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="12%" valign="top" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">100</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">%</font></p>

  </td>

  <td width="12%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">100</font></p>

  </td>

  <td width="50%" valign="bottom" style="padding:0in 0in 0in 0in;width:50.0%;">

  <p style="margin:0in 0in .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">%</font></p>

  </td>

 </tr>

</table>



</div>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">No other

customer accounted for more than 10% of the Company&#146;s revenues during those

periods.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">At September 30, 2002,

receivables from the Company&#146;s four largest customers were approximately 26%,

18%, 17% and 13%, respectively, of the total accounts receivable.&#160; At June 30, 2002, receivables from the

Company&#146;s largest customer were approximately 63% of the total accounts

receivable.&#160; No other customer accounted

for more than 10% of the Company&#146;s receivables as of September 30, 2002 and

June 30, 2002.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Gross profit for the quarter

ended September 30, 2002 increased by approximately $1,016,000, and as a

percentage of revenues increased from a negative 204.7% to a positive 2.0% in

the current quarter.&#160; The favorable change

in gross profit was due primarily to (1) a lower manufacturing cost structure

resulting from restructuring measures implemented in fiscal year 2002 that

included headcount reductions, provisions for asset impairment resulting in

lower depreciation expense, and the closing of the Company&#146;s Optical Thin Films

Technology Center; and (2) a provision for excess and obsolete inventories of

DWDM filters and DWDM filter test equipment of approximately $540,000 recorded

in the quarter ended September 30, 2001.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Research and development

expenses decreased by approximately $366,000, or 54.1%, for the quarter ended

September 30, 2002 compared to the same period last year.&#160; The decrease was due to a lower level of

resources being devoted to the development of DWDM filters, as reflected in

reductions in staff.</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Selling, general and

administrative expenses increased by approximately $33,000, or 7.1% for the

quarter ended September 30, 2002 compared to the same period last year.&#160; The increase was due primarily to higher

legal expenses related to corporate governance issues.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The provision for asset

impairment of approximately $3,444,000 recorded in the quarter ended September

30, 2001 represents a writedown to the lower of carrying value or fair market

value of certain of the Company&#146;s property and equipment invested in its

optical thin film coating product line.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Interest expense consists of

interest on capital lease obligations and imputed interest on accrued

restructuring costs related to the present value of future lease payments on

idle space.&#160; Interest expense increased

by approximately $4,000, or 223.5%, over fiscal year 2002 due primarily to the

imputed interest on restructuring costs.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Interest income decreased by

approximately $69,000, or 76.3% for the quarter ended September 30, 2002

compared to the previous year.&#160; The

decrease was due to the lower base of cash and cash equivalents and lower

interest rates.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The loss on sale of assets of

approximately $5,000 represents the loss on the sale of a small portion of the

property and equipment held for sale, which formerly was invested in the

Company&#146;s telecommunications product line.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">No income tax provision was

recorded in the first quarter of fiscal year 2003 or 2002 because of the losses

generated in those periods.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">Liquidity and

Capital Resources</font></u></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">For the three months ended

September 30, 2002, the Company&#146;s cash and cash equivalents decreased by

approximately $736,000 to $5,089,000 (including non-recurring payments of

approximately $168,000 related to idle space and terminating the lease on the

Optical Thin Film Technology Center as discussed below).&#160; The decrease in cash and cash equivalents

was due to cash used by operating activities of approximately $712,000, capital

expenditures of approximately $16,000, and repayment of debt of approximately

$13,000, partially offset by proceeds received from the sale of assets of

approximately $5,000.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">During the quarter ended

September 30, 2002, the Company entered into an agreement to terminate the

lease on its Optical Thin Film Technology Center effective September 30,

2002.&#160; The termination agreement

required payment of a cancellation fee of approximately $161,000, and relieved

the Company of a lease obligation estimated at approximately $460,000.</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">10</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
<!-- SEQ.=1,FOLIO='10',FILE='C:\C2\rfossie\5575_4\t_872268\j5575_10qsb.htm',USER='rfossie',CD='Nov  7 16:34 2002' -->
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<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Contractual cash commitments

for the fiscal years subsequent to September 30, 2002 are summarized as

follows:</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="43%" valign="bottom" style="padding:0in 0in 0in 0in;width:43.02%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt 10.0pt;text-align:center;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">2003</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">2004</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Thereafter</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Total</font></b></p>

  </td>

  <td width="0%" valign="bottom" style="padding:0in 0in 0in 0in;width:.98%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="43%" valign="top" style="padding:0in 0in 0in 0in;width:43.02%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="0%" valign="bottom" style="padding:0in 0in 0in 0in;width:.98%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="43%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:43.02%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Capital leases</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="10%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:10.7%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">23,643</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="10%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:10.7%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3,874</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="10%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:10.7%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#151;</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="10%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:10.7%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">27,517</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:.98%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="43%" valign="top" style="padding:0in 0in 0in 0in;width:43.02%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Operating leases</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">31,465</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">12,000</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#151;</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">43,465</font></p>

  </td>

  <td width="0%" valign="bottom" style="padding:0in 0in 0in 0in;width:.98%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="43%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:43.02%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Total</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="10%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in 0in 0in 0in;width:10.7%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">55,108</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="10%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in 0in 0in 0in;width:10.7%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">15,874</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="10%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in 0in 0in 0in;width:10.7%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#151;</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>

  </td>

  <td width="10%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in 0in 0in 0in;width:10.7%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">70,982</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:.98%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>

  </td>

 </tr>

</table>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company intends to continue

devoting resources to internally funded research and development spending on

both new products and the improvement of existing products.&#160; The Company also intends to devote resources

to the marketing and product support of its medical instrument product line and

medical instruments related optical thin films.&#160; These investments may temporarily result in negative cash flow,

but the Company anticipates that the result of these efforts will translate

into increased revenues.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company believes that its

cash and cash equivalents are sufficient to support working capital and

investment needs for at least the next twelve months.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">Recent

Accounting Pronouncements</font></u></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The

Financial Accounting Standards Board, (FASB), issued SFAS No. 145, <i><font style="font-style:italic;">Rescission of FASB Statements No. 4, 44, and 64,

Amendment of FASB Statement No. 13, and Technical Corrections</font></i>,

effective for fiscal years beginning May 15, 2002 or later that rescinds FASB

Statement No. 4, <i><font style="font-style:italic;">Reporting Gains and Losses

from Extinguishment of Debt</font></i>, FASB Statement No. 64, <i><font style="font-style:italic;">Extinguishments of Debt Made to Satisfy Sinking-Fund

Requirements</font></i>, and FASB Statement No. 44, <i><font style="font-style:italic;">Accounting for Intangible Assets of Motor Carriers</font></i>.&#160; This Statement amends SFAS No. 4 and SFAS

No. 13, <i><font style="font-style:italic;">Accounting for Leases</font></i>, to

eliminate an inconsistency between the required accounting for sale-leaseback

transactions.&#160; This Statement also

amends other existing authoritative pronouncements to make various technical

corrections, clarify meanings, or describe their applicability under changed

conditions.&#160; Adopting SFAS No. 145 on

July 1, 2002 did not have a material impact on the Company&#146;s consolidated

financial statements.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In July

2002, the FASB issued SFAS No. 146, <i><font style="font-style:italic;">Accounting

for Costs Associated with Exit or Disposal Activities</font></i>.&#160; SFAS No. 146 is based on the fundamental

principle that a liability for a cost associated with an exit or disposal

activity should be recorded when it (1) is incurred, that is, when it meets the

definition of a liability in FASB Concepts Statement No. 6, <i><font style="font-style:italic;">Elements of Financial Statements</font></i>, and (2)

can be measured at fair value.&#160; The

principal reason for issuing SFAS No. 146 is the FASB&#146;s belief that some

liabilities for costs associated with exit or disposal activities that entities

record under current accounting pronouncements, in particular EITF Issue 94-3,

do not meet the definition of a liability.&#160;

SFAS No. 146 nullifies EITF Issue 94-3; thus, it will have a significant

effect on practice because commitment to an exit or disposal plan no longer

will be a sufficient basis for recording a liability for costs related to those

activities.&#160; SFAS No. 146 is effective

for exit and disposal activities initiated after December 31, 2002.&#160; Early application is encouraged; however,

previously issued financial statements may not be restated.&#160; An entity would continue to apply the

provisions of EITF Issue 94-3 to an exit activity that is initiated under an

exit plan that met the criteria of EITF Issue 94-3 before the entity initially

applied SFAS No. 146.&#160; Adopting SFAS No.

146 on July 1, 2002 did not have a material impact on the Company&#146;s

consolidated financial statements.</font></p>



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<p style="margin:0in 0in .0001pt;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">Workforce

Reduction</font></u></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company has taken

additional measures to realign its cost structure with current revenue

expectations.&#160; In October 2002, the

Company reduced its full-time workforce by approximately 16%, or six employees.&#160; As a result of this action, the Company

expects to record a non-recurring pretax charge to earnings of approximately

$53,000 for employee severance benefits in the quarter ending December 31,

2002.&#160; In addition, the Company is in

the process of reviewing other expense areas to determine where additional

reductions in discretionary spending can be achieved.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">Trends and

Uncertainties That May Affect Future Results</font></u></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">For the quarter ended September

30, 2002, cash and cash equivalents decreased by approximately $736,000,

including non-recurring payments of approximately $168,000 related to idle

space and terminating the lease on the Optical Thin Film Technology Center&#160; (which relieved the Company of an estimated

$460,000 lease obligation).&#160; Excluding

the non-recurring payments, cash usage during the quarter was $568,000, a 37%

sequential decrease in cash usage from the previous quarter ended June 30,

2002.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">During the quarter ending

December 31, 2002, the Company anticipates receiving net proceeds of

approximately $550,000 related to the sale of a portion of its assets held for

sale (the property and equipment previously used in the Company&#146;s

telecommunications product line).&#160; The

remaining assets in this category are anticipated to be sold by June 30, 2003.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Capital equipment expenditures

during the quarter ended September 30, 2002 were approximately $16,000, down

51% from the quarter ended September 30, 2001.&#160;

Future capital expenditures will be dependent upon future sales and

success of on-going research and development efforts.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">For the quarter ended September

30, 2002, research and development expenses were approximately $310,000, down

54% from the $676,000 in the quarter ended September 30, 2001.&#160; It is anticipated that the quarterly level

of R&amp;D expenses for the foreseeable future will remain in this lower range,

but is ultimately dependent upon the Company&#146;s assessment of new product

opportunities.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company&#146;s recently

introduced new medical products and certain non-medical applications of its

optical technology have been well received by the marketplace.&#160; These new products include:</font></p>



<p style="margin:0in 0in .0001pt 85.7pt;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt 85.7pt;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Stereo endoscope

systems (used in cardiac surgery and a growing number of other minimally

invasive surgical procedures).</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt 85.7pt;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>30&#186; line of

sight version of the successful 5 mm autoclavable laparoscope.</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt 85.7pt;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>4 mm short

endoscope (used in carpal tunnel surgery).</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt 85.7pt;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Longer version

of the 10 mm laparoscope (used in bariatric surgery for treatment of morbid

obesity).</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt 85.7pt;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>5 mm 30&#186;

endoscope (used in vessel transplant for cardiac bypass surgery).</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt 85.7pt;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Relay lens

system (for use in medical digital photo microscopy).</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt 85.7pt;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Episcope (for

use in examination of the epidermis).</p>



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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">12</font></p>





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<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">These initiatives alone have

already generated orders from new and existing customers totaling approximately

$1,170,000, of which approximately $83,000 was shipped in fiscal year 2002,

approximately $181,000 was shipped in the quarter ended September 30, 2002, and

approximately $274,000 and $384,000, respectively, is scheduled to be shipped

during the quarters ending December 31, 2002 and March 31, 2003.&#160; The timing of the remaining shipments on

these orders of approximately $248,000 is dependent upon customer delivery

instructions.&#160; The Company anticipates

additional follow-on orders for these products.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Achievements of ISO 9001 and CE

Mark certification, as previously announced, are also expected to support

increased future sales opportunities, both foreign and domestic, for the

Company&#146;s medical products.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">Common Stock Listing on NASDAQ SmallCap

Market</font></u></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">As previously disclosed, the Company has been

notified that it is not in compliance with the $1.00 minimum share price

requirement for continued listing on the Nasdaq SmallCap Market. The Company

will have until February 10, 2003 to regain compliance with Nasdaq&#146;s $1.00

minimum bid price requirement. In order to regain compliance, the bid price of

the Company&#146;s common stock must close at or above $1.00 per share for a minimum

of 10 consecutive trading days.&#160; As indicated

above, the Company has undertaken a number of product development and marketing

initiatives to increase sales and shareholder value.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The delisting of the Company&#146;s common stock

from the Nasdaq SmallCap Market may materially impair the stockholder&#146;s ability

to buy and sell shares of the Company&#146;s common stock, and could have an adverse

effect on the market price of, and the efficiency of the trading market for,

the Company&#146;s common stock. In addition, the delisting of the Company&#146;s common

stock could significantly impair the Company&#146;s ability to raise capital should

it desire to do so in the future.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company&#146;s listing on the

Nasdaq SmallCap Market is very important to the Company and the Company intends

to take all reasonable measures to regain and maintain compliance. The Company

intends to seek shareholder approval at the annual meeting of shareholders in

November 2002 of an amendment to its Articles of Organization, to be filed at

the discretion of the Board of Directors, to effect a reverse stock split.&#160; Under the terms of the reverse stock split,

every three to six shares of common stock would be converted into one share of

common stock.&#160; The exact ratio will be

between and may include one-to-three and one-to-six, to be determined by the

Board of Directors.&#160; If approved by the

stockholders, the Board of Directors will implement the reverse stock split if

it believes it will be in the Company&#146;s best interests.&#160; There can be no assurance, however, that a

reverse stock split will have the desired consequences. Specifically, there can

be no assurance that, after a reverse stock split, the market price of the

common stock will not decrease to a level that causes the Company to again face

de-listing, or that the Company&#146;s market capitalization after the reverse split

will not be less than its market capitalization before the reverse split.&#160; If the Company is unsuccessful in

maintaining the listing of shares of its common stock on the Nasdaq SmallCap

Market, it will most likely seek to have its shares traded on the OTC Bulletin

Board.</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">13</font></p>





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<p style="font-size:10.0pt;margin:0in 0in .0001pt;"><a name="Item3ControlsAndProcedures"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">Item 3</font></u>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Controls and Procedures</a></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.25in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Evaluation

of Disclosure Controls and Procedures</u>.&#160;

The Company&#146;s Chief Executive Officer and Chief Financial Officer have

conducted an evaluation of the Company&#146;s disclosure controls and procedures as

of a date (the &quot;Evaluation Date&quot;) within 90 days before the of filing

of this quarterly report.&#160; Based on

their evaluation, the Company&#146;s Chief Executive Officer and Chief Financial

Officer have concluded that the Company&#146;s disclosure controls and procedures

are effective to ensure that information required to be disclosed by the

Company in reports that it files or submits under the Securities Exchange Act

of 1934 is recorded, processed, summarized and reported within the time periods

specified in the applicable Securities and Exchange Commission rules and forms.</p>



<p style="margin:0in 0in .0001pt 1.25in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.25in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Changes

in Internal Controls and Procedures</u>.&#160;

Subsequent to the Evaluation Date, there were no significant changes in

the Company&#146;s internal controls or in other factors that could significantly

affect these controls, nor were any corrective actions required with regard to

significant deficiencies and material weaknesses.</p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">14</font></p>





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<p style="margin:0in 0in .0001pt;"><a name="PartIi_OtherInformation"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">PART II.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; OTHER

INFORMATION</font></b></a></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;"><a name="Items15NotApplicable_"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">Items 1-5</font></u>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Not Applicable.</a></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;"><a name="Item6ExhibitsAndReportsOnForm8k"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">Item 6</font></u>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Exhibits and Reports on

Form 8-K</a></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt 120.6pt;text-indent:-.25in;"><a name="AExhibitsExhibit99Certificatio"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)</font></a><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Exhibits &#150; Exhibit 99 &#150; Certification of

Quarterly Report</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt 120.6pt;text-indent:-.25in;"><a name="BReportsOnForm8k"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)</font></a><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Reports

on Form 8-K &#150; The Company filed three Current Reports on Form 8-K during

the quarter ended September 30, 2002 as follows:&#160; (i) On July 2, 2002, the Company reported that on July 1, 2002,

it had dismissed Arthur Andersen LLP as its independent accountant.&#160; (ii) On July 16, 2002, the Company reported

that it had engaged KPMG LLP as its new independent accountant.&#160; (iii)&#160;

On September 24, 2002, the Company reported a press release issued on

September 23, 2002, reporting its operating results for the fiscal year and

fourth quarter ended June 30, 2002.</p>



<p style="margin:0in 0in .0001pt 1.75in;text-indent:-117.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In accordance

with the requirements 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 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

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  <td width="50%" valign="top" style="padding:0in 0in 0in 0in;width:50.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="50%" colspan="3" valign="top" style="padding:0in 0in 0in 0in;width:50.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">PRECISION

  OPTICS CORPORATION, INC.</font></p>

  </td>

 </tr>

 <tr>

  <td width="50%" valign="top" style="padding:0in 0in 0in 0in;width:50.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="4%" valign="top" style="padding:0in 0in 0in 0in;width:4.62%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="45%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:45.38%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="50%" valign="top" style="padding:0in 0in 0in 0in;width:50.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="4%" valign="top" style="padding:0in 0in 0in 0in;width:4.62%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="45%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:45.38%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="50%" valign="top" style="padding:0in 0in 0in 0in;width:50.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">DATE:

  November 7, 2002</font></p>

  </td>

  <td width="4%" valign="top" style="padding:0in 0in 0in 0in;width:4.62%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">BY:</font></p>

  </td>

  <td width="32%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:32.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/&#160; Jack P. Dreimiller</font></p>

  </td>

  <td width="12%" valign="top" style="padding:0in 0in 0in 0in;width:12.44%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="50%" valign="top" style="padding:0in 0in 0in 0in;width:50.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="4%" valign="top" style="padding:0in 0in 0in 0in;width:4.62%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="45%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:45.38%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Jack P.

  Dreimiller</font></p>

  </td>

 </tr>

 <tr>

  <td width="50%" valign="top" style="padding:0in 0in 0in 0in;width:50.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="4%" valign="top" style="padding:0in 0in 0in 0in;width:4.62%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="45%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:45.38%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Senior Vice

  President, Finance,</font></p>

  </td>

 </tr>

 <tr>

  <td width="50%" valign="top" style="padding:0in 0in 0in 0in;width:50.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="4%" valign="top" style="padding:0in 0in 0in 0in;width:4.62%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="45%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:45.38%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Chief

  Financial Officer and Clerk</font></p>

  </td>

 </tr>

</table>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">15</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
<!-- SEQ.=1,FOLIO='15',FILE='C:\C2\rfossie\5575_4\t_872268\j5575_10qsb.htm',USER='rfossie',CD='Nov  7 16:34 2002' -->
<br clear="all" style="page-break-before:always;">

</font>



<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">CERTIFICATIONS</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">I, Richard E. Forkey, certify that:</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.&#160;&#160;&#160;&#160; I have reviewed this quarterly report on Form 10-QSB of

Precision Optics Corporation, Inc.;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.&#160;&#160;&#160;&#160; Based on my knowledge, this quarterly 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 quarterly report;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.&#160;&#160;&#160;&#160; Based on my knowledge, the financial statements, and other

financial information included in this quarterly 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 quarterly

report;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.&#160;&#160;&#160;&#160; The registrant&#146;s other certifying officers and I are responsible

for establishing and maintaining disclosure controls and procedures (as defined

in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:</font></p>



<p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">a)&#160;&#160;&#160;&#160; designed such disclosure controls and procedures 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 quarterly report is being prepared;</font></p>



<p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">b)&#160;&#160;&#160; evaluated the effectiveness of the registrant&#146;s disclosure

controls and procedures as of a date within 90 days prior to the filing date of

this quarterly report (the &#147;Evaluation Date&#148;); and</font></p>



<p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">c)&#160;&#160;&#160;&#160; presented in this quarterly report our conclusions about the

effectiveness of the disclosure controls and procedures based on our evaluation

as of the Evaluation Date;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5.&#160;&#160;&#160;&#160; The registrant&#146;s other certifying officers and I have disclosed,

based on our most recent evaluation, to the registrant&#146;s auditors and the audit

committee of registrant&#146;s board of directors (or persons performing the

equivalent functions):</font></p>



<p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">a)&#160;&#160;&#160;&#160; all significant deficiencies in the design or operation of

internal controls which could adversely affect the registrant&#146;s ability to

record, process, summarize and report financial data and have identified for

the registrant&#146;s auditors any material weaknesses in internal controls; and</font></p>



<p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">b)&#160;&#160;&#160; any fraud, whether or not material, that involves management or

other employees who have a significant role in the registrant&#146;s internal

controls; and</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6.&#160;&#160;&#160;&#160; The registrant&#146;s other certifying officers and I have indicated

in this quarterly report whether or not there were significant changes in

internal controls or in other factors that could significantly affect internal

controls subsequent to the date of our most recent evaluation, including any

corrective actions with regard to significant deficiencies and material

weaknesses.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="48%" valign="top" style="padding:0in .7pt 0in .7pt;width:48.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Date: November 7, 2002</font></p>

  </td>

  <td width="51%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:51.92%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="48%" valign="top" style="padding:0in .7pt 0in .7pt;width:48.08%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="51%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:51.92%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="48%" valign="top" style="padding:0in .7pt 0in .7pt;width:48.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="25%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:25.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;&#160; /s/&#160; Richard E. Forkey</font></p>

  </td>

  <td width="25%" valign="top" style="padding:0in .7pt 0in .7pt;width:25.96%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="48%" valign="top" style="padding:0in .7pt 0in .7pt;width:48.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="51%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:51.92%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Richard E. Forkey</font></p>

  </td>

 </tr>

 <tr>

  <td width="48%" valign="top" style="padding:0in .7pt 0in .7pt;width:48.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="51%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:51.92%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Chief Executive Officer</font></p>

  </td>

 </tr>

</table>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">16</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
<!-- SEQ.=1,FOLIO='16',FILE='C:\C2\rfossie\5575_4\t_872268\j5575_10qsb.htm',USER='rfossie',CD='Nov  7 16:34 2002' -->
<br clear="all" style="page-break-before:always;">

</font>



<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">CERTIFICATIONS</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">I, Jack P. Dreimiller, certify that:</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.&#160;&#160;&#160;&#160; I have reviewed this quarterly report on Form 10-QSB of

Precision Optics Corporation, Inc.;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.&#160;&#160;&#160;&#160; Based on my knowledge, this quarterly 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 quarterly report;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.&#160;&#160;&#160;&#160; Based on my knowledge, the financial statements, and other

financial information included in this quarterly 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 quarterly

report;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.&#160;&#160;&#160;&#160; The registrant&#146;s other certifying officers and I are responsible

for establishing and maintaining disclosure controls and procedures (as defined

in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:</font></p>



<p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">a)&#160;&#160;&#160;&#160; designed such disclosure controls and procedures 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 quarterly report is being prepared;</font></p>



<p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">b)&#160;&#160;&#160; evaluated the effectiveness of the registrant&#146;s disclosure

controls and procedures as of a date within 90 days prior to the filing date of

this quarterly report (the &#147;Evaluation Date&#148;); and</font></p>



<p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">c)&#160;&#160;&#160;&#160; presented in this quarterly report our conclusions about the

effectiveness of the disclosure controls and procedures based on our evaluation

as of the Evaluation Date;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5.&#160;&#160;&#160;&#160; The registrant&#146;s other certifying officers and I have disclosed,

based on our most recent evaluation, to the registrant&#146;s auditors and the audit

committee of registrant&#146;s board of directors (or persons performing the

equivalent functions):</font></p>



<p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">a)&#160;&#160;&#160;&#160; all significant deficiencies in the design or operation of

internal controls which could adversely affect the registrant&#146;s ability to

record, process, summarize and report financial data and have identified for

the registrant&#146;s auditors any material weaknesses in internal controls; and</font></p>



<p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">b)&#160;&#160;&#160; any fraud, whether or not material, that involves management or

other employees who have a significant role in the registrant&#146;s internal

controls; and</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6.&#160;&#160;&#160;&#160; The registrant&#146;s other certifying officers and I have indicated

in this quarterly report whether or not there were significant changes in

internal controls or in other factors that could significantly affect internal

controls subsequent to the date of our most recent evaluation, including any

corrective actions with regard to significant deficiencies and material

weaknesses.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="47%" valign="top" style="padding:0in .7pt 0in .7pt;width:47.38%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Date: November 7, 2002</font></p>

  </td>

  <td width="52%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:52.62%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="47%" valign="top" style="padding:0in .7pt 0in .7pt;width:47.38%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="52%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:52.62%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="47%" valign="top" style="padding:0in .7pt 0in .7pt;width:47.38%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="52%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:52.62%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="47%" valign="top" style="padding:0in .7pt 0in .7pt;width:47.38%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="26%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:26.32%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/&#160; Jack P. Dreimiller</font></p>

  </td>

  <td width="26%" valign="top" style="padding:0in .7pt 0in .7pt;width:26.32%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="47%" valign="top" style="padding:0in .7pt 0in .7pt;width:47.38%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="52%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:52.62%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Jack P. Dreimiller</font></p>

  </td>

 </tr>

 <tr>

  <td width="47%" valign="top" style="padding:0in .7pt 0in .7pt;width:47.38%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="52%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:52.62%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Chief Financial

  Officer&#160; </font></p>

  </td>

 </tr>

</table>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">17</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



</div>



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<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>3
<FILENAME>j5575_ex99.htm
<DESCRIPTION>EX-99
<TEXT>
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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">EXHIBIT 99</font></b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">PRECISION

OPTICS CORPORATION, INC.</font></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">CERTIFICATION

PURSUANT TO</font></b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">SECTION 1350, CHAPTER

63 OF TITLE 18, UNITED STATES CODE,</font></b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">AS ADOPTED PURSUANT

TO</font></b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002</font></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman"><font style="font-size:10.0pt;">We,

Richard E. Forkey, Chief Executive Officer, and Jack P. Dreimiller, Chief

Financial Officer, of Precision Optics Corporation, Inc. (the &#147;Company&#148;),

certify, p</font>ursuant to Section 1350, Chapter 63 of Title 18, United

States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of

2002, that:</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="left" style="color:purple;margin:0in 0in .0001pt .5in;text-align:left;text-indent:-.5in;"><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;">(1)</font><font size="1" color="black" style="color:windowtext;font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" color="black" style="color:windowtext;font-size:10.0pt;">The

Quarterly Report on Form 10-QSB of the Company for the quarter ended September

30, 2002 (the &#147;Report&#148;) fully complies with the requirements of Section 13(a)

or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78 m or 78o(d)); and</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(2)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The

information contained in the Report fairly presents, in all material respects,

the financial condition and results of operations of the Company.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">DATE:&#160; November 7, 2002</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="98%" style="border-collapse:collapse;width:98.0%;">

 <tr>

  <td width="22%" valign="top" style="padding:0in 0in 0in 0in;width:22.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="29%" valign="top" style="padding:0in 0in 0in 0in;width:29.14%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="38%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:38.58%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/ Richard E. Forkey</font></p>

  </td>

  <td width="10%" valign="top" style="padding:0in 0in 0in 0in;width:10.3%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

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  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

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  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="48%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:48.88%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Richard E. Forkey, Chairman of the Board, Chief</font></p>

  </td>

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  <td width="22%" valign="top" style="padding:0in 0in 0in 0in;width:22.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="29%" valign="top" style="padding:0in 0in 0in 0in;width:29.14%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="48%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:48.88%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Executive Officer, President and Treasurer</font></p>

  </td>

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  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="29%" valign="top" style="padding:0in 0in 0in 0in;width:29.14%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="48%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:48.88%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="22%" valign="top" style="padding:0in 0in 0in 0in;width:22.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="29%" valign="top" style="padding:0in 0in 0in 0in;width:29.14%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="48%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:48.88%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

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 <tr>

  <td width="22%" valign="top" style="padding:0in 0in 0in 0in;width:22.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="29%" valign="top" style="padding:0in 0in 0in 0in;width:29.14%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="38%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:38.58%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/ Jack P. Dreimiller</font></p>

  </td>

  <td width="10%" valign="top" style="padding:0in 0in 0in 0in;width:10.3%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

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  <td width="22%" valign="top" style="padding:0in 0in 0in 0in;width:22.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="29%" valign="top" style="padding:0in 0in 0in 0in;width:29.14%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="48%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:48.88%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Jack P. Dreimiller, Senior Vice President Finance,</font></p>

  </td>

 </tr>

 <tr>

  <td width="22%" valign="top" style="padding:0in 0in 0in 0in;width:22.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="29%" valign="top" style="padding:0in 0in 0in 0in;width:29.14%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="48%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:48.88%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Chief Financial Officer and Clerk</font></p>

  </td>

 </tr>

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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>





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