-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
 MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
 TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
 RKNBDvzyTgBm3YBNb/VWASVWoYajd0j5jv+Ll86m5G/1v5PJ/VLsO0IMGeYSBGXk
 PvjNpKLnWQxawoMs3kLdlA==

<SEC-DOCUMENT>0001144204-05-008137.txt : 20060420
<SEC-HEADER>0001144204-05-008137.hdr.sgml : 20060420

<ACCEPTANCE-DATETIME>20050318164816

<PRIVATE-TO-PUBLIC>

ACCESSION NUMBER:		0001144204-05-008137

CONFORMED SUBMISSION TYPE:	10KSB/A

PUBLIC DOCUMENT COUNT:		8

CONFORMED PERIOD OF REPORT:	20040630

FILED AS OF DATE:		20050318

DATE AS OF CHANGE:		20050505


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:		10KSB/A

		SEC ACT:		1934 Act

		SEC FILE NUMBER:	001-10647

		FILM NUMBER:		05692165



	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>10KSB/A
<SEQUENCE>1
<FILENAME>v014603_10ksba.htm
<TEXT>
<HTML><HEAD>
<TITLE>
</TITLE>
</HEAD><BODY id=38 bgColor=#ffffff><A name=page_1></A>
<P align=center><B><FONT face=serif size=2>SECURITIES AND EXCHANGE
COMMISSION<BR>Washington, D.C. 20549 </FONT></B></P>
<P align=center><B><U><FONT face=serif
size=2>__________________________________</FONT></U></B><B><FONT face=serif
size=2> </FONT></B></P>
<P style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"
align=center><B><FONT face=serif size=2> </FONT></B></P>
<P style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"
align=center><B><FONT face=serif size=2>FORM 10-KSB/A<BR>(Amendment No.
1)</FONT></B></P><FONT face=serif size=2>
<P style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"
align=center><B><FONT face=serif size=2> </FONT></B></P></FONT>
<P><FONT face=serif size=2>(Mark One) </FONT></P>
<P><FONT face=serif size=2>[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 </FONT></P>
<P><FONT face=serif size=2>For the Fiscal Year Ended </FONT><U><FONT face=serif
size=2>June 30, 2004</FONT></U><FONT face=serif size=2> </FONT></P>
<P align=center><FONT face=serif size=2>OR</FONT></P>
<P><FONT face=serif size=2>[&nbsp; ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934</FONT></P>
<P><FONT face=serif size=2>For transition period from ____ to ____ </FONT></P>
<P align=center><FONT face=serif size=2>Commission File Number </FONT><U><FONT
face=serif size=2>001-10647</FONT></U> </P>
<P align=center><FONT face=serif size=2></FONT><B><FONT face=serif
size=2>PRECISION OPTICS CORPORATION, INC.<BR></FONT></B><FONT face=serif
size=2>(Name of small business issuer in its charter) </FONT></P>
<DIV>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=bottom>
    <TD noWrap align=middle width="33%"><B><FONT face=serif
      size=2>MASSACHUSETTS</FONT></B>&nbsp; </TD>
    <TD width="33%">&nbsp; </TD>
    <TD noWrap align=middle width="33%"><B><FONT face=serif
      size=2>04-279-5294</FONT></B>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=middle width="33%"><FONT face=serif size=2>(State or
      other jurisdiction</FONT>&nbsp; </TD>
    <TD width="33%">&nbsp; </TD>
    <TD noWrap align=middle width="33%"><FONT face=serif size=2>(I.R.S.
      Employer</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=middle width="33%"><FONT face=serif size=2>of
      incorporation or organization)</FONT>&nbsp; </TD>
    <TD width="33%">&nbsp; </TD>
    <TD noWrap align=middle width="33%"><FONT face=serif size=2>Identification
      No.)</FONT>&nbsp; </TD></TR></TABLE></DIV><BR>
<P align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT face=serif size=2>22 East
Broadway<BR>Gardner, Massachusetts 01440<BR></FONT></B><FONT face=serif
size=2>(Address of principal executive offices) (Zip Code) </FONT></P>
<P align=center><B><FONT face=serif size=2>(978) 630-1800<BR></FONT></B><FONT
face=serif size=2>(Issuer&#8217;s telephone number, including area code) </FONT></P>
<P align=center><FONT face=serif size=2>Securities registered under Section
12(b) of the Act:</FONT></P>
<P align=center><B><FONT face=serif size=2>None</FONT></B><FONT face=serif
size=2> </FONT></P>
<P align=center><FONT face=serif size=2>Securities registered under Section
12(g) of the Act:</FONT></P>
<P align=center><B><FONT face=serif size=2>Common Stock, $.01 par value
</FONT></B></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Check whether the
issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act 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. Yes <U>X</U> No __</FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Check if no disclosure
of delinquent filers in response to Item 405 of Regulation S-B is contained in
this form, and no disclosure will be contained, to the best of registrant&#8217;s
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><U><FONT face=serif size=2>X</FONT></U></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face=serif size=2>The issuer&#8217;s revenues
for its most recent fiscal year were $1,464,964.</FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The aggregate market
value of the voting stock, consisting solely of common stock, held by
non-affiliates of the issuer computed by reference to the closing price of such
stock was $3,325,138 as of August 31, 2004.</FONT></P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The number
of shares of outstanding common stock of the issuer as of August 31, 2004 was
7,008,212.</FONT></P>
<P align=center><FONT face=serif size=2></FONT><B><FONT face=serif
size=2>DOCUMENTS INCORPORATED BY REFERENCE</FONT></B><FONT face=serif size=2>
</FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The issuer&#8217;s Proxy
Statement for the 2004 Annual Meeting of Shareholders to be held on November 9,
2004 is incorporated into Part III of this Form 10-KSB.</FONT></P>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face=serif>1</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV><FONT
face=serif size=3></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG></STRONG></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center> </DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>EXPLANATORY
NOTE</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center> </DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><STRONG><BR></STRONG></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left> </DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
Amendment No.&nbsp;1 on Form 10-KSB/A is filed by Precision Optics Corporation,
Inc. (the &#8220;Company&#8221;) as an amendment to the Company&#8217;s Annual Report on Form
10-KSB for the fiscal year ended June 30, 2004 (i) to amend Item&nbsp;8A of the
Form 10-KSB, and (ii) to replace Exhibits 31.1 and 31.2 thereto with corrected
versions of those Exhibits submitted herewith. The original Exhibits 31.1 and
31.2 contained incorrect introductory language in paragraph 5 due to a
production error. This Amendment No. 1 speaks as of the original filing date of
the Company&#8217;s Annual Report on Form 10-KSB and has not been updated to reflect
events occurring subsequent to the original filing date.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left> </DIV>
<DIV></DIV></FONT>
<P style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"
align=center><B><FONT face=serif size=3>PART I</FONT></B></P>
<DIV>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD noWrap><FONT face=serif>ITEM 1.&nbsp;</FONT></TD>
    <TD width="100%"><U><FONT face=serif>DESCRIPTION OF
      BUSINESS</FONT></U><FONT face=serif>&nbsp; </FONT></TD></TR></TABLE></DIV>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><U><FONT face=serif size=2>BUSINESS
DEVELOPMENT</FONT></U></B><B><FONT face=serif size=2> </FONT></B></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2> Precision Optics
Corporation, Inc. (the &#8220;Company&#8221;) was incorporated in Massachusetts in 1982 and
has been publicly owned since November 1990. </FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2> References to the
Company contained herein include its two wholly-owned subsidiaries, except where
the context otherwise requires. </FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><U><FONT face=serif size=2>BUSINESS OF
ISSUER</FONT></U></B></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2> Precision Optics
Corporation, a developer and manufacturer of advanced optical instruments since
1982, designs and produces high-quality medical instruments, optical thin film
coatings, and other advanced optical systems. The Company&#8217;s medical
instrumentation line includes laparoscopes, arthroscopes and endocouplers and a
line of world-class 3-D endoscopes for use in minimally invasive surgical
procedures. Precision Optics Corporation is certified to the ISO 9001 Quality
Standard, and complies with the FDA Good Manufacturing Practices and the
European Union Medical Device Directive for CE Marking of its medical products.
The Company&#8217;s Internet Website is </FONT><U><FONT face=serif
size=2>www.poci.com</FONT></U><FONT face=serif size=2>. </FONT></P>
<P><B><U><FONT face=serif size=2>Principal Products and Services and Methods of
Distribution</FONT></U></B><B><FONT face=serif size=2>.</FONT></B></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U><FONT face=serif size=2>Medical
Products</FONT></U><FONT face=serif size=2>. The Company&#8217;s medical products
include endoscopes, as well as image couplers, beamsplitters and adapters, all
of which are used as accessories to endoscopes.</FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Since January 1991, the
Company has developed and sold endoscopes using various optical technologies for
use in a variety of minimally invasive surgical and diagnostic procedures. The
Company&#8217;s current line of specialized endoscopes include arthroscopes (which are
used in joint surgery), laryngoscopes (which are used in the diagnosis of
diseases of the larynx), laparoscopes (which are used in abdominal surgery) and
stereo endoscopes and cameras (which are used in cardiac and general surgery,
and enable surgeons to visualize the surgical field in 3-D imagery, thus
facilitating greater finesse and minimizing surgical risk). In addition to its
existing line of endoscopes, the Company is continuing to develop different
types of endoscopes that incorporate varying types of construction and
technology for use in various medical specialties.</FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>In March 2002, the
Company shipped the first production lot of autoclavable endoscopes to a major
orthopedic equipment supplier. These endoscopes, which are also CE Mark
certified for European use, have been designed and tested to withstand
sterilization by flash and standard autoclave, as well as all other commonly
used medical sterilization means. The major benefits of autoclavable instruments
include increased patient safety, quick turnaround, and elimination of hazardous
sterilant and by-product materials, all of which provide a much better value to
the user. The Company believes its autoclavable endoscope technology will
generate opportunities for endoscope revenue growth, particularly in Europe
where autoclaving is the preferred method of sterilization.</FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2> The Company developed
and has manufactured and sold since 1985 a proprietary product line of
instrumentation to couple endoscopes to video cameras. Included in this product
line are imaging couplers, which physically connect the endoscope to a video
camera system and transmit the image viewed through the scope to the video
camera. Another product, the beamsplitter, performs the same function while
preserving for the viewer an eyeport for direct, simultaneous viewing through
the endoscope. The Company has sold these devices primarily to endoscope and
video camera manufacturers and suppliers for resale under the Company&#8217;s
customers&#8217; names.</FONT></P>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face=serif>2</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2> The Company&#8217;s image
couplers and beamsplitters can withstand surgery-approved sterilization. The
Company also offers autoclavable image couplers, which are able to withstand
sterilization in superheated steam under pressure. Autoclavability is a
preferred method of sterilization because of its relative speed, safety, and
efficiency. The Company believes that it is one of the few companies in the
world that produces autoclavable image couplers.</FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Included in the
Company&#8217;s medical products sales are sales of image couplers and beamsplitters
for video-monitored examination of a variety of industrial cavities and
interiors. The Company has developed, and may develop in the future, specialized
borescopes for industrial applications.</FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U><FONT face=serif size=2>Optical Thin Films.
</FONT></U><FONT face=serif size=2>The Company designs and manufactures various
types of high quality thin film coatings for use in a wide range of optical
applications. Thin film coatings are produced in-house for the Company&#8217;s medical
instrumentation and other products. Presently, optical thin film manufacturing
not associated with the Company&#8217;s medical instruments and other products is
limited or very specialized.</FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2> </FONT><U><FONT
face=serif size=2>Optical System Design and Development Services</FONT></U><FONT
face=serif size=2>. The Company provides on a contract basis advanced lens
design, imaging analysis, optical system design, structural design and analysis,
prototype production and evaluation, optics testing, and optical system
assembly. Some of the Company&#8217;s development contracts have led to optical system
production business for the Company, and the Company believes its prototype
development service may lead to new product production from time to time.
</FONT></P>
<P><B><U><FONT face=serif size=2>Competition and Markets</FONT></U></B><B><FONT
face=serif size=2>.</FONT></B></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT face=serif size=2> </FONT></B><FONT
face=serif size=2>The areas in which the Company does business are highly
competitive and include both foreign and domestic competitors. Many of the
Company&#8217;s competitors are larger and have substantially greater resources than
the Company. Furthermore, other domestic or foreign companies, some with greater
experience in the optics industry and greater financial resources than the
Company, may seek to produce products or services that compete with those of the
Company. The Company may establish or use production facilities overseas to
produce key components for the Company&#8217;s business, such as lenses. The Company
believes that the cost savings from such production may be essential to the
Company&#8217;s ability to compete on a price basis in the medical products area
particularly and to the Company&#8217;s profitability generally.</FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Company believes
that competition for sales of its medical products and services, which have been
principally sold to medical device companies, who incorporate the Company&#8217;s
products into their systems, is based on performance and other technical
features, as well as other factors, such as scheduling and reliability, in
addition to competitive price.</FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Company has
marketed and sold its endoscopes to original equipment manufacturer (OEM) video
camera and video endoscopy suppliers for resale under the purchaser&#8217;s name. A
number of domestic and foreign competitors also sell endoscopes to such OEM
suppliers, and the Company&#8217;s share of the endoscope market is nominal. The
Company believes that, while its resources are substantially more limited than
its competitors, the Company can compete successfully in this market on the
basis of price and delivery.</FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2> The Company currently
sells its image couplers, beamsplitters, and adapters to a market that consists
of approximately 30 to 35 potential OEM customers. These potential customers
sell video cameras, endoscopes, or video-endoscopy systems. The Company has made
sales in the past to approximately two thirds of these customers. The Company
estimates that it has approximately 20% to 30% of the market share in these
products. The Company&#8217;s primary competition in this area is the customers&#8217; own
in-house capabilities to manufacture such products. The Company believes that
these customers typically purchase products from the Company, despite their
in-house capabilities, because they choose to devote their own technical
resources to their primary products, such as cameras or endoscopes. However, the
Company <FONT face=serif size=2>estimates that approximately 50% of the market
demand for image couplers, beamsplitters, and adapters is met by &#8220;capt ive&#8221; or
in-house capabilities.</FONT></FONT></P>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face=serif>3</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV><A
name=page_4></A>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Company offers
advanced optical design and development services not related to thin film
coatings to a wide range of potential customers and has numerous competitors.
The ability to supply design and development services to such customers is
highly dependent upon a company&#8217;s and its employees&#8217; reputations and prior
experience.</FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Company has had
negligible direct export sales to date. However, during fiscal year 2002, the
Company&#8217;s medical products received the CE Mark Certification, which permits
sales into the European marketplace. </FONT></P>
<P><B><U><FONT face=serif size=2>Research and Development</FONT></U></B><B><FONT
face=serif size=2>.</FONT></B></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT face=serif> </FONT></B><FONT
face=serif size=2>The Company believes that its future success depends to a
large degree on its ability to continue to conceive and to develop new optical
products and services to enhance the performance characteristics and methods of
manufacture of existing products. Accordingly, it expects to continue to seek to
obtain product-related design and development contracts with customers and to
invest its own funds on its research and development. The Company spent
approximately $1,319,000 and $1,235,000 of its own funds during fiscal years
2004 and 2003, respectively, on research and development.</FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2> The Company continues
to explore potential applications of single-molecule technology and
nanotechnology. </FONT></P>
<P><B><U><FONT face=serif size=2>Raw Materials and Principal
Suppliers</FONT></U></B><B><FONT face=serif size=2>.</FONT></B></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>For all of the
Company&#8217;s products, except for thin film coatings, the basic raw material is
precision grade optical glass, which the Company obtains from several major
suppliers. Outside vendors grind and polish most of the Company&#8217;s lenses and
prisms. For optical thin film coatings, the basic raw materials are metals and
dielectric compounds, which the Company obtains from a variety of chemical
suppliers. Certain of the thin film coatings utilized in the Company&#8217;s products
are currently procured from an outside supplier, but most thin film coatings are
produced in-house. The Company believes that its demand for these raw materials
and thin film coating services is small relative to the total supply and that
materials and services required for the production of its products are currently
available in sufficient production quantities and will be available for fiscal
year 2005. The Company believes, however, that there are relatively few s
uppliers of the high quality lenses and prisms which its endoscopes require. The
Company has therefore established an in-house optical shop for producing
ultra-high quality prisms, micro-optics and other specialized optics for a
variety of medical and industrial applications.</FONT></P><B><U><FONT face=serif
size=2>Patents and Trademarks</FONT></U></B><B><FONT face=serif
size=2>.</FONT></B><BR>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Company relies, in
part, upon patents, trade secrets, and proprietary knowledge as well as
personnel policies and employee confidentiality agreements concerning inventions
and other creative efforts to develop and to maintain its competitive position.
The Company does not believe that its business is dependent upon any patent,
patent pending, or license, although it believes that trade secrets and
confidential know-how may be important to the Company&#8217;s scientific and
commercial success. </FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Company plans to
file for patents, copyrights, and trademarks in the United States and in
appropriate countries to protect its intellectual property rights to the extent
practicable. The Company holds the rights to several United States and foreign
patents and has several patent applications pending. The Company knows of no
infringements of its patents. The Company plans to protect its patents from
infringement in each instance where it determines that doing so would be
economical in light of the expense involved and the level and availability of
the Company&#8217;s financial resources. While the Company believes <FONT face=serif
size=2>that its pending applications relate to patentable devices or concepts,
there can be no assurance that patents will be issued or that any patents issued
can be successfully defended or will effectively limit the development of
competitive products and services. </FONT></FONT></P>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face=serif>4</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV><A
name=page_5></A>
<P><B><U><FONT face=serif size=2>Employees</FONT></U></B><B><FONT face=serif
size=2>.</FONT></B><FONT face=serif size=2> </FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>As of June 30, 2004,
the Company had 30 full-time employees and 5 part-time employees. There were 17
employees in manufacturing, 11 in engineering, 2 in sales and marketing, and 5
in finance and administration.</FONT></P>
<P><B><U><FONT face=serif size=2>Customers</FONT></U></B><B><FONT face=serif
size=2>.</FONT></B></P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Revenues
from the Company&#8217;s largest customers, as a percentage of total revenues, were as
follows:</FONT></P>
<DIV>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%" height=22>&nbsp; </TD>
    <TD height=22>&nbsp; </TD>
    <TD noWrap align=middle colSpan=2 height=22><B><FONT face=serif
      size=2>2004</FONT></B> </TD>
    <TD align=middle height=22>&nbsp; </TD>
    <TD noWrap align=middle colSpan=2 height=22><B><FONT face=serif
      size=2>2003</FONT></B> </TD>
    <TD align=middle height=22>&nbsp; </TD>
    <TD noWrap align=middle colSpan=2 height=22><B><FONT face=serif
      size=2>2002</FONT></B> </TD></TR>
  <TR>
    <TD colSpan=11 height=26>&nbsp; </TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="100%" bgColor=#cbdbd1 height=22><FONT
      face=serif size=2>Customer
      A</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD bgColor=#cbdbd1 height=22>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1 height=22><FONT face=serif
      size=2>24</FONT> </TD>
    <TD noWrap align=left bgColor=#cbdbd1 height=22><FONT face=serif
      size=2>%</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1 height=22>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1 height=22><FONT face=serif
      size=2>17</FONT> </TD>
    <TD noWrap align=left bgColor=#cbdbd1 height=22><FONT face=serif
      size=2>%</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1 height=22>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1 height=22><FONT face=serif
      size=2>18</FONT> </TD>
    <TD noWrap align=left bgColor=#cbdbd1 height=22><FONT face=serif
      size=2>%</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%" height=22><FONT face=serif
      size=2>Customer B</FONT>&nbsp; </TD>
    <TD height=22>&nbsp; </TD>
    <TD noWrap align=right height=22><FONT face=serif size=2>22</FONT> </TD>
    <TD noWrap align=left height=22>&nbsp; </TD>
    <TD height=22>&nbsp; </TD>
    <TD noWrap align=right height=22><FONT face=serif size=2>2</FONT> </TD>
    <TD noWrap align=left height=22>&nbsp; </TD>
    <TD height=22>&nbsp; </TD>
    <TD noWrap align=right height=22><FONT face=serif size=2>&#8212;</FONT></TD>
    <TD noWrap align=left height=22>&nbsp; </TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="100%" bgColor=#cbdbd1 height=22><FONT
      face=serif size=2>Customer C</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1 height=22>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1 height=22><FONT face=serif
      size=2>&#8212;</FONT> </TD>
    <TD noWrap align=left bgColor=#cbdbd1 height=22>&nbsp; </TD>
    <TD bgColor=#cbdbd1 height=22>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1 height=22><FONT face=serif
      size=2>44</FONT> </TD>
    <TD noWrap align=left bgColor=#cbdbd1 height=22>&nbsp; </TD>
    <TD bgColor=#cbdbd1 height=22>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1 height=22><FONT face=serif
      size=2>&#8212;</FONT></TD>
    <TD noWrap align=left bgColor=#cbdbd1 height=22>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%" height=22><FONT face=serif
      size=2>Customer D</FONT>&nbsp; </TD>
    <TD height=22>&nbsp; </TD>
    <TD noWrap align=right height=22><FONT face=serif size=2>4</FONT> </TD>
    <TD noWrap align=left height=22>&nbsp; </TD>
    <TD height=22>&nbsp; </TD>
    <TD noWrap align=right height=22><FONT face=serif size=2>5</FONT> </TD>
    <TD noWrap align=left height=22>&nbsp; </TD>
    <TD height=22>&nbsp; </TD>
    <TD noWrap align=right height=22><FONT face=serif size=2>23</FONT> </TD>
    <TD noWrap align=left height=22>&nbsp; </TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="100%" bgColor=#cbdbd1 height=22><FONT
      face=serif size=2>All Others</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1 height=22>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1 height=22><FONT face=serif
      size=2>50</FONT> </TD>
    <TD noWrap align=left bgColor=#cbdbd1 height=22>&nbsp; </TD>
    <TD bgColor=#cbdbd1 height=22>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1 height=22><FONT face=serif
      size=2>32</FONT> </TD>
    <TD noWrap align=left bgColor=#cbdbd1 height=22>&nbsp; </TD>
    <TD bgColor=#cbdbd1 height=22>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1 height=22><FONT face=serif
      size=2>59</FONT> </TD>
    <TD noWrap align=left bgColor=#cbdbd1 height=22>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left height=22>&nbsp;</TD>
    <TD height=22>&nbsp;</TD>
    <TD noWrap align=right height=22>
      <HR noShade SIZE=1>
    </TD>
    <TD noWrap align=left height=22>&nbsp;</TD>
    <TD height=22>&nbsp;</TD>
    <TD noWrap align=right height=22>
      <HR noShade SIZE=1>
    </TD>
    <TD noWrap align=left height=22>&nbsp;</TD>
    <TD height=22>&nbsp;</TD>
    <TD noWrap align=right height=22>
      <HR noShade SIZE=1>
    </TD>
    <TD noWrap align=left height=22>&nbsp;</TD></TR>
  <TR>
    <TD colSpan=11 height=22>&nbsp; </TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="100%" bgColor=#cbdbd1 height=22>&nbsp; </TD>
    <TD bgColor=#cbdbd1 height=22>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1 height=22><FONT face=serif
      size=2>100</FONT> </TD>
    <TD noWrap align=left bgColor=#cbdbd1 height=22><FONT face=serif
      size=2>%</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1 height=22>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1 height=22><FONT face=serif
      size=2>100</FONT> </TD>
    <TD noWrap align=left bgColor=#cbdbd1 height=22><FONT face=serif
      size=2>%</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1 height=22>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1 height=22><FONT face=serif
      size=2>100</FONT> </TD>
    <TD noWrap align=left bgColor=#cbdbd1 height=22><FONT face=serif
      size=2>%</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left height=22>&nbsp;</TD>
    <TD height=22>&nbsp;</TD>
    <TD noWrap align=right height=22>
      <HR noShade SIZE=2>
    </TD>
    <TD noWrap align=left height=22>&nbsp;</TD>
    <TD height=22>&nbsp;</TD>
    <TD noWrap align=right height=22>
      <HR noShade SIZE=2>
    </TD>
    <TD noWrap align=left height=22>&nbsp;</TD>
    <TD height=22>&nbsp;</TD>
    <TD noWrap align=right height=22>
      <HR noShade SIZE=2>
    </TD>
    <TD noWrap align=left height=22>&nbsp;</TD></TR></TABLE></DIV>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>No other customer
accounted for more than 10% of the Company&#8217;s revenues in fiscal years 2004,
2003, and 2002. </FONT></P>
<P><B><U><FONT face=serif size=2>Environmental Protection and the Effect of
Existing or Probable Government Regulations on the
Business</FONT></U></B><B><FONT face=serif size=2>.</FONT></B><FONT face=serif
size=2> </FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Company&#8217;s
operations are subject to a variety of federal, state, and local laws and
regulations relating to the discharge of materials into the environment or
otherwise relative to the protection of the environment. From time to time the
Company uses a small amount of hazardous materials in its operations. The
Company believes that it complies with all applicable environmental laws and
regulations.</FONT></P>
<P><B><U><FONT face=serif size=2>Need for Government Approval of Principal
Products or Services and Effect of Existing or Probable Government Regulations
on the Business</FONT></U></B><B><FONT face=serif size=2>.</FONT></B><FONT
face=serif size=2> </FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Company currently
sells and markets several medical products, the marketing of which may require
the permission of the United States Food and Drug Administration (&#8220;FDA&#8221;).
Pursuant to the Company&#8217;s notification to the FDA of its intent to market its
endoscopes, image couplers, beamsplitters, and adapters, the FDA has determined
that the Company may market such devices, subject to the general controls
provisions of the Food, Drug and Cosmetic Act. This FDA permission was obtained
without the need to undergo a lengthy and expensive approval process, on account
of the FDA&#8217;s determination that such devices meet the regulatory standard of
being substantially equivalent to an existing approved device. Furthermore, the
Company plans to market additional endoscopes and related medical products that
may require the FDA&#8217;s permission to market such products. The Company may also
develop additional products or seek to sell some of its c urrent or future
medical products in a manner that requires the Company to obtain the permission
of the FDA to market such products, as well as the regulatory approval or
license of other federal, state, and local agencies or similar agencies in other
countries. The FDA has authority to conduct detailed inspections of
manufacturing plants in order to assure that &#8220;good manufacturing practices&#8221; are
being followed in the manufacture of medical devices, to require periodic
reporting of product defects to the FDA, and to prohibit the sale of devices
which do not comply with law.</FONT></P>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face=serif>5</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV id=PGBRK
style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">&nbsp;</DIV>
<DIV>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD noWrap><FONT face=serif>ITEM 2. &nbsp;</FONT></TD>
    <TD width="100%"><U><FONT face=serif>DESCRIPTION OF
  PROPERTY</FONT></U></TD></TR></TABLE></DIV>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Company conducts
its domestic operations at two</FONT><B><FONT face=serif size=2>
</FONT></B><FONT face=serif size=2>facilities in Gardner, Massachusetts. The
main Gardner facility is leased from a corporation owned by an
officer-shareholder-director of the Company. The lease terminated in December
1999 and the Company is currently a tenant at will. The other Gardner facility
is being rented on a month-to-month basis. The Company rents office space in
Hong Kong for sales, marketing and supplier quality control and liaison
activities of its Hong Kong subsidiary. </FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Company believes
these facilities are adequate for its current operations and adequately covered
by insurance. Significant increases in production or the addition of significant
equipment additions or manufacturing capabilities in connection with the
production of the Company&#8217;s line of endoscopes, optical thin films, and other
products may, however, require the acquisition or lease of additional
facilities. The Company may establish production facilities domestically or
overseas to produce key assemblies or components, such as lenses, for the
Company&#8217;s products. Overseas facilities may subject the Company to the political
and economic risks associated with overseas operations. The loss of or inability
to establish or maintain such additional domestic or overseas facilities could
materially adversely affect the Company&#8217;s competitive position and
profitability. </FONT></P>
<DIV>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD noWrap><FONT face=serif>ITEM 3.&nbsp;</FONT></TD>
    <TD width="100%"><U><FONT face=serif>LEGAL PROCEEDINGS</FONT></U><FONT
      face=serif>&nbsp; </FONT></TD></TR></TABLE></DIV>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2> None. </FONT></P>
<DIV>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD noWrap><FONT face=serif>ITEM 4.&nbsp;</FONT></TD>
    <TD width="100%"><U><FONT face=serif>SUBMISSION OF MATTERS TO A VOTE OF
      SECURITY HOLDERS</FONT></U><FONT face=serif>&nbsp;
</FONT></TD></TR></TABLE></DIV>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>No matters were
submitted to a vote of the Company&#8217;s security holders during the fourth quarter
of fiscal year 2004. </FONT></P>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face=serif>6</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV><A
name=page_7></A>
<P align=center><B><FONT face=serif size=2>Directors and Executive Officers of
the Company</FONT></B></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Company&#8217;s executive
officers and directors are as follows:</FONT></P>
<DIV>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=bottom>
    <TD noWrap align=left width="50%"></TD>
    <TD noWrap align=left width="50%"><FONT face=serif size=2>Position with
      the Company</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="50%"><FONT face=serif size=2>Name</FONT> </TD>
    <TD noWrap align=left width="50%"><FONT face=serif size=2>or Principal
      Occupation</FONT> </TD></TR>
  <TR>
    <TD colSpan=3></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left>
      <HR align=left width="98%" noShade SIZE=1>
    </TD>
    <TD noWrap align=left>
      <HR align=left width="98%" noShade SIZE=1>
    </TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="50%" bgColor=#cbdbd1><FONT face=serif
      size=2>Richard E. Forkey</FONT> </TD>
    <TD noWrap align=left width="50%" bgColor=#cbdbd1><FONT face=serif
      size=2>Chairman of the Board, Chief Executive</FONT> </TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="50%" bgColor=#cbdbd1></TD>
    <TD noWrap align=left width="50%" bgColor=#cbdbd1><FONT face=serif
      size=2>Officer, President, Treasurer and</FONT> </TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="50%" bgColor=#cbdbd1></TD>
    <TD noWrap align=left width="50%" bgColor=#cbdbd1><FONT face=serif
      size=2>Director</FONT> </TD></TR>
  <TR>
    <TD colSpan=3></TD></TR>
  <TR>
    <TD colSpan=3></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left>&nbsp;</TD>
    <TD noWrap align=left>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="50%"><FONT face=serif size=2>Jack P.
      Dreimiller</FONT> </TD>
    <TD noWrap align=left width="50%"><FONT face=serif size=2>Senior Vice
      President, Finance,</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="50%"></TD>
    <TD noWrap align=left width="50%"><FONT face=serif size=2>Chief Financial
      Officer and Clerk</FONT> </TD></TR>
  <TR>
    <TD colSpan=3></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left>&nbsp;</TD>
    <TD noWrap align=left>&nbsp;</TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="50%" bgColor=#cbdbd1><FONT face=serif
      size=2>Edward A. Benjamin</FONT> </TD>
    <TD noWrap align=left width="50%" bgColor=#cbdbd1><FONT face=serif
      size=2>Director and Member of Audit Committee. Mr.</FONT> </TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="50%" bgColor=#cbdbd1></TD>
    <TD noWrap align=left width="50%" bgColor=#cbdbd1><FONT face=serif
      size=2>Benjamin is a retired partner in the law firm of</FONT> </TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="50%" bgColor=#cbdbd1></TD>
    <TD noWrap align=left width="50%" bgColor=#cbdbd1><FONT face=serif
      size=2>Ropes &amp; Gray LLP, Boston, Massachusetts.</FONT> </TD></TR>
  <TR>
    <TD colSpan=3></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left>&nbsp;</TD>
    <TD noWrap align=left>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="50%"><FONT face=serif size=2>Joel R.
      Pitlor</FONT> </TD>
    <TD noWrap align=left width="50%"><FONT face=serif size=2>Director. Mr.
      Pitlor is president of J.R. Pitlor, a</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="50%"></TD>
    <TD noWrap align=left width="50%"><FONT face=serif size=2>management
      consulting firm based in Cambridge,</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="50%"></TD>
    <TD noWrap align=left width="50%"><FONT face=serif
      size=2>Massachusetts.</FONT> </TD></TR>
  <TR>
    <TD colSpan=3></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left>&nbsp;</TD>
    <TD noWrap align=left>&nbsp;</TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="50%" bgColor=#cbdbd1><FONT face=serif
      size=2>Robert R. Shannon</FONT> </TD>
    <TD noWrap align=left width="50%" bgColor=#cbdbd1><FONT face=serif
      size=2>Director and Member of Audit Committee. Mr.</FONT> </TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="50%" bgColor=#cbdbd1></TD>
    <TD noWrap align=left width="50%" bgColor=#cbdbd1><FONT face=serif
      size=2>Shannon is a professor at the Optical Sciences</FONT> </TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="50%" bgColor=#cbdbd1></TD>
    <TD noWrap align=left width="50%" bgColor=#cbdbd1><FONT face=serif
      size=2>Center of the University of Arizona in Tucson,</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="50%" bgColor=#cbdbd1></TD>
    <TD noWrap align=left width="50%" bgColor=#cbdbd1><FONT face=serif
      size=2>Arizona.</FONT> </TD></TR></TABLE></DIV>
<DIV id=PGBRK
style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">&nbsp;</DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><BR><A
name=page_8></A>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face=serif>7</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<P align=center><B><FONT face=serif size=3>PART II</FONT></B><FONT face=serif
size=3> </FONT></P>
<DIV>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD noWrap><FONT face=serif>ITEM 5.&nbsp;</FONT></TD>
    <TD width="100%"><U><FONT face=serif>MARKET FOR COMMON EQUITY AND RELATED
      STOCKHOLDER MATTERS</FONT></U><FONT face=serif>&nbsp;
</FONT></TD></TR></TABLE></DIV>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Company&#8217;s common
stock is listed on the National Association of Securities Dealers Automated
Quotation (NASDAQ) System under the symbol &#8220;POCI.&#8221; Since January 1992, the
NASDAQ SmallCap Market has been the principal market in which the Company&#8217;s
stock is publicly traded. The high and low sales prices (as adjusted for the
1-for-6 reverse stock split that became effective on January 29, 2003) for the
Company&#8217;s stock for each full quarterly period within the two most recent fiscal
years were as follows as reported by NASDAQ. </FONT></P>
<DIV>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%">&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=middle colSpan=5><FONT face=serif size=2>2003</FONT> </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=middle colSpan=5><FONT face=serif size=2>2004</FONT>
  </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD noWrap align=middle colSpan=5>
      <HR noShade SIZE=1>
    </TD>
    <TD>&nbsp;</TD>
    <TD noWrap align=middle colSpan=5>
      <HR noShade SIZE=1>
    </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%"><FONT face=serif
      size=2>Quarter</FONT>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=middle colSpan=2><FONT face=serif
      size=2>High</FONT>&nbsp; </TD>
    <TD align=middle>&nbsp; </TD>
    <TD noWrap align=middle colSpan=2><FONT face=serif size=2>Low</FONT>&nbsp;
    </TD>
    <TD align=middle>&nbsp; </TD>
    <TD noWrap align=middle colSpan=2><FONT face=serif
      size=2>High</FONT>&nbsp; </TD>
    <TD align=middle>&nbsp; </TD>
    <TD noWrap align=middle colSpan=2><FONT face=serif size=2>Low</FONT>&nbsp;
    </TD></TR>
  <TR>
    <TD width="100%"></TD>
    <TD></TD>
    <TD colSpan=2>
      <HR noShade SIZE=1>
    </TD>
    <TD></TD>
    <TD colSpan=2>
      <HR noShade SIZE=1>
    </TD>
    <TD></TD>
    <TD colSpan=2>
      <HR noShade SIZE=1>
    </TD>
    <TD></TD>
    <TD colSpan=2>
      <HR noShade SIZE=1>
    </TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="100%" bgColor=#cbdbd1><FONT face=serif
      size=2>First</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>$</FONT>
</TD>
    <TD noWrap align=left bgColor=#cbdbd1><FONT face=serif
    size=2>3.42</FONT></TD>
    <TD bgColor=#cbdbd1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1><FONT face=serif size=2>$</FONT></TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif
    size=2>1.32</FONT></TD>
    <TD bgColor=#cbdbd1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>$</FONT>
</TD>
    <TD noWrap align=left bgColor=#cbdbd1><FONT face=serif
    size=2>2.80</FONT></TD>
    <TD bgColor=#cbdbd1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>$</FONT>
</TD>
    <TD noWrap align=middle bgColor=#cbdbd1><FONT face=serif
    size=2>1.90</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%"><FONT face=serif
      size=2>Second</FONT>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=right><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=left><FONT face=serif size=2>4.56</FONT></TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left><FONT face=serif size=2>$</FONT></TD>
    <TD noWrap align=right><FONT face=serif size=2>.96</FONT></TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=right><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=left><FONT face=serif size=2>2.67</FONT></TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=right><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=middle><FONT face=serif size=2>1.71</FONT></TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="100%" bgColor=#cbdbd1><FONT face=serif
      size=2>Third</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>$</FONT>
</TD>
    <TD noWrap align=left bgColor=#cbdbd1><FONT face=serif
    size=2>2.40</FONT></TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1><FONT face=serif size=2>$</FONT></TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif
    size=2>1.30</FONT></TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>$</FONT>
</TD>
    <TD noWrap align=left bgColor=#cbdbd1><FONT face=serif
    size=2>6.99</FONT></TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>$</FONT>
</TD>
    <TD noWrap align=middle bgColor=#cbdbd1><FONT face=serif
    size=2>1.96</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%"><FONT face=serif
      size=2>Fourth</FONT>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=right><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=left><FONT face=serif size=2>3.44</FONT></TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left><FONT face=serif size=2>$</FONT></TD>
    <TD noWrap align=right><FONT face=serif size=2>1.43</FONT></TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=right><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=left><FONT face=serif size=2>5.72</FONT></TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=right><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=middle><FONT face=serif
size=2>1.05</FONT></TD></TR></TABLE></DIV>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>As of August 31, 2004,
there were approximately 203 holders of record of the Company&#8217;s common stock.
Holders of record include nominees who may hold shares on behalf of multiple
beneficial owners. </FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Company has not
declared any dividends during the last two fiscal years. At present, the Company
intends to retain its earnings, if any, to finance research and development and
expansion of its business. </FONT></P>
<P align=center><B><FONT face=serif size=2>EQUITY COMPENSATION PLAN INFORMATION
</FONT></B></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The following table
provides information about the Company&#8217;s Common Stock that may be issued upon
the exercise of options, warrants and rights under all of our existing equity
compensation plans as of June 30, 2004, including, but not limited to, the 1989
Stock Option Plan and the 1997 Incentive Plan: </FONT></P>
<DIV>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%">&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=middle colSpan=2><FONT face=serif size=2>Number of
      securities</FONT> </TD>
    <TD align=middle>&nbsp; </TD>
    <TD noWrap align=middle></TD>
    <TD noWrap align=middle>&nbsp;</TD>
    <TD align=middle>&nbsp; </TD>
    <TD noWrap align=middle>&nbsp;</TD>
    <TD noWrap align=middle>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%">&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=middle colSpan=2><FONT face=serif size=2>to be issued
      upon</FONT> </TD>
    <TD align=middle>&nbsp; </TD>
    <TD noWrap align=middle colSpan=2><FONT face=serif
      size=2>Weighted-average</FONT>&nbsp; </TD>
    <TD align=middle>&nbsp; </TD>
    <TD noWrap align=middle colSpan=2><FONT face=serif size=2>Number of
      securities remaining</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%">&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=middle colSpan=2><FONT face=serif size=2>exercise
      of</FONT> </TD>
    <TD align=middle>&nbsp; </TD>
    <TD noWrap align=middle colSpan=2><FONT face=serif size=2>exercise price
      of</FONT>&nbsp; </TD>
    <TD align=middle>&nbsp; </TD>
    <TD noWrap align=middle colSpan=2><FONT face=serif size=2>available for
      future issuance under</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%">&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=middle colSpan=2><FONT face=serif size=2>outstanding
      options,</FONT> </TD>
    <TD align=middle>&nbsp; </TD>
    <TD noWrap align=middle colSpan=2><FONT face=serif size=2>outstanding
      options,</FONT>&nbsp; </TD>
    <TD align=middle>&nbsp; </TD>
    <TD noWrap align=middle colSpan=2><FONT face=serif size=2>equity
      compensation plans (excluding</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%">&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=middle colSpan=2><FONT face=serif size=2>warrants and
      rights</FONT> </TD>
    <TD align=middle>&nbsp; </TD>
    <TD noWrap align=middle colSpan=2><FONT face=serif size=2>warrants and
      rights</FONT>&nbsp; </TD>
    <TD align=middle>&nbsp; </TD>
    <TD noWrap align=middle colSpan=2><FONT face=serif size=2>securities
      reflected in first column)</FONT> </TD></TR>
  <TR>
    <TD colSpan=11>&nbsp; </TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="100%" bgColor=#cbdbd1><FONT face=serif
      size=2>Equity compensation</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif
      size=2>131,953</FONT> </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1 colSpan=2>
      <DIV align=center><FONT face=serif size=2>$</FONT><FONT face=serif
      size=2>11.79</FONT></DIV></TD>
    <TD bgColor=#cbdbd1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif
      size=2>183,153</FONT> </TD>
    <TD noWrap align=left bgColor=#cbdbd1><FONT face=serif
      size=2>(1)</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="100%" bgColor=#cbdbd1><FONT face=serif
      size=2>plans approved by</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1></TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1 colSpan=2></TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1></TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="100%" bgColor=#cbdbd1><FONT face=serif
      size=2>shareholders</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1></TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1></TD>
    <TD noWrap align=right bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1></TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD></TR>
  <TR>
    <TD colSpan=11>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%"><FONT face=serif size=2>Equity
      compensation</FONT>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=right><FONT face=serif size=2>9,168</FONT> </TD>
    <TD noWrap align=left><FONT face=serif size=2>(2)(3)(4)</FONT></TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left colSpan=2>
      <DIV align=center><FONT face=serif size=2>$</FONT><FONT face=serif
      size=2>8.08</FONT></DIV></TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=right><FONT face=serif size=2>n/a</FONT></TD>
    <TD noWrap align=left>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%"><FONT face=serif size=2>plans not
      approved</FONT>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left></TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left></TD>
    <TD noWrap align=right>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left></TD>
    <TD noWrap align=left>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%"><FONT face=serif size=2>by
      shareholders</FONT>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left></TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left></TD>
    <TD noWrap align=right>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left></TD>
    <TD noWrap align=left>&nbsp; </TD></TR>
  <TR>
    <TD colSpan=11>&nbsp; </TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="100%" bgColor=#cbdbd1><FONT face=serif
      size=2>Total</FONT>&nbsp; </TD>
    <TD align=right bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif
      size=2>141,121</FONT> </TD>
    <TD noWrap align=right bgColor=#cbdbd1>&nbsp; </TD>
    <TD align=right bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1 colSpan=2>
      <DIV align=center><FONT face=serif size=2>$</FONT><FONT face=serif
      size=2>11.55</FONT></DIV></TD>
    <TD align=right bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif
      size=2>183,153</FONT> </TD>
    <TD noWrap align=right bgColor=#cbdbd1>&nbsp; </TD></TR></TABLE></DIV>
<DIV>&nbsp;</DIV>
<DIV><BR><A name=page_9></A>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face=serif>8</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<P><FONT face=serif size=2>(1) Includes 183,153 shares of Common Stock available
for future grants under the Company&#8217;s 1997 Incentive Plan. No shares are
available for future grants under the Company&#8217;s 1989 Stock Option
Plan.</FONT></P>
<P><FONT face=serif size=2>(2) Includes 2,500 shares of Common Stock issuable
upon exercise of outstanding options granted to Mr. Benjamin in connection with
his service on the Board of Directors. These options may be exercised at a price
of $8.25 per share and expire on December 15, 2004. </FONT></P>
<P><FONT face=serif size=2>(3) Includes 2,500 shares of Common Stock issuable
upon exercise of outstanding options granted to Mr. Shannon in connection with
his service on the Board of Directors. These options may be exercised at a price
of $8.25 per share and expire on December 15, 2004. </FONT></P>
<P><FONT face=serif size=2>(4) Includes 4,168 shares of Common Stock issuable
upon exercise of outstanding options granted to Werner Thiel in connection with
his service as a consultant to the Company. Options exercisable for 3,334 shares
may be exercised at a price of $7.78125 and expire on July 13, 2005. Options
exercisable for 834 shares may be exercised at a price of $8.25 and expire on
December 15, 2004. </FONT></P>
<DIV>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD noWrap><FONT face=serif>ITEM 6.&nbsp;</FONT></TD>
    <TD width="100%"><U><FONT face=serif>MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS
      OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</FONT></U><FONT
      face=serif>&nbsp; </FONT></TD></TR></TABLE></DIV>
<P><B><U><FONT face=serif size=2>Important Factors Regarding Forward-Looking
Statements</FONT></U></B></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2> When used in this
discussion, the words &#8220;believes&#8221;, &#8220;anticipates&#8221;, &#8220;intends to&#8221;, and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties which could cause actual results
to differ materially from those projected. These risks and uncertainties, many
of which are not within the Company&#8217;s control, include, but are not limited to,
the uncertainty and timing of the successful development of the Company&#8217;s new
products, particularly in the optical thin films area, the risks associated with
reliance on a few key customers; the Company&#8217;s ability to maintain compliance
with requirements for continued listing on the Nasdaq SmallCap Market; the
Company&#8217;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 46;s research and development expenditures; the
timing and level of market acceptance of customers&#8217; products for which the
Company supplies components; performance of the Company&#8217;s vendors; the ability
of the Company to control costs associated with performance under fixed price
contracts; and the continued availability to the Company of essential supplies,
materials and services; which are described further in Exhibit 99.1 hereto.
Readers are cautioned not to place undue reliance on these forward looking
statements, which speak only as of the date hereof. 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><B><U><FONT face=serif size=2>Overview</FONT></U></B></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Precision Optics
Corporation, a developer and manufacturer of advanced optical instruments since
1982, designs and produces high-quality optical thin film coatings, medical
instruments, and other advanced optical systems. The Company&#8217;s medical
instrumentation line includes laparoscopes, arthroscopes and endocouplers and a
world-class product line of 3-D endoscopes for use in minimally invasive
surgical procedures. </FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Company is
currently developing specialty instruments incorporating its patent-pending
LENSLOCK</FONT><SUP><FONT face=serif size=1>TM </FONT></SUP><FONT face=serif
size=2>technology which ensures lower cost, easier repairability and enhanced
durability as well as ultra-small instruments (some with lenses less than one
millimeter in diameter) utilizing patent-pending micro-precision<SUP><FONT
size=1>TM</FONT> </SUP>lens technology. The Company is also exploring new
initiatives in single-molecule technology and nanotechnology for biomedical and
other applications.</FONT></P>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">9</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV><A
name=page_10></A>
<P><FONT face=serif size=2>Precision Optics Corporation is certified to the ISO
9001 Quality Standard, and complies with the FDA Good Manufacturing Practices
and the European Union Medical Device Directive for CE Marking of its medical
products. The Company&#8217;s Internet Website is </FONT><U><FONT face=serif
color=#0000ff size=2>www.poci.com</FONT></U><FONT face=serif size=2>.
</FONT></P>
<P><FONT face=serif size=2>The areas in which the Company does business are
highly competitive and include both foreign and domestic competitors. Many of
the Company&#8217;s competitors are larger and have substantially greater resources
than the Company. Furthermore, other domestic or foreign companies, some with
greater experience in the optics industry and greater financial resources than
the Company, may seek to produce products or services that compete with those of
the Company. The Company uses production facilities overseas to produce key
components for the Company&#8217;s business, such as lenses. The Company believes that
the cost savings from such production is essential to the Company&#8217;s ability to
compete on a price basis in the medical products area particularly and to the
Company&#8217;s profitability generally. </FONT></P>
<P><FONT face=serif size=2>The Company believes that competition for sales of
its medical products and services, which have been principally sold to original
equipment manufacturer (OEM) customers, is based on performance and other
technical features, as well as other factors, such as scheduling and
reliability, in addition to competitive price.</FONT></P>
<P><FONT face=serif size=2>The Company believes that its future success depends
to a large degree on its ability to continue to conceive and to develop new
optical products and services to enhance the performance characteristics and
methods of manufacture of existing products. Accordingly, it expects to continue
to seek to obtain product-related design and development contracts with
customers and to invest its own funds on research and development, to the extent
funds are available.</FONT></P>
<P><FONT face=serif size=2>The Company relies, in part, upon patents, trade
secrets and proprietary knowledge as well as personnel policies and employee
confidentiality agreements concerning inventions and other creative efforts to
develop and to maintain its competitive position. The Company does not believe
that its business is dependent upon any particular patent, patent pending, or
license, although it believes that trade secrets and confidential know-how may
be important to the Company&#8217;s scientific and commercial success.</FONT></P>
<P><FONT face=serif size=2>The Company conducts its domestic operations at two
leased facilities in Gardner, Massachusetts. The Company rents office space in
Hong Kong for sales, marketing and supplier quality control and liaison
activities of its Hong Kong subsidiary. The Company believes these facilities
are adequate for its current operations. Significant increases in production or
the addition of significant equipment or manufacturing capabilities in
connection with the production for the Company&#8217;s line of endoscopes, optical
thin films, and other products may, however, require the acquisition or lease of
additional facilities.</FONT></P>
<P><B><U><FONT face=serif size=2>Critical Accounting Policies and
Estimates</FONT></U></B></P><I><FONT face=serif size=2>General</FONT></I>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Management&#8217;s discussion
and analysis of financial condition and results of operations are based upon the
Company&#8217;s consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America (&#8220;U.S. GAAP&#8221;). The preparation of these consolidated financial
statements requires the Company to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses. 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. Actual results may
differ from these estimates under different assumptions or
conditions.</FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>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>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">10</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV><A
name=page_11></A>
<P><I><FONT face=serif size=2>Revenue Recognition</FONT></I></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2> The Company recognizes
revenue in accordance with U.S. GAAP and SEC Staff Accounting Bulletin (&#8220;SAB&#8221;)
No. 104, </FONT><I><FONT face=serif size=2>Revenue Recognition in Financial
Statements. </FONT></I><FONT face=serif size=2>SAB No. 104 requires that four
basic criteria must be met before revenue can be recognized: (1) persuasive
evidence of an arrangement exists; (2) delivery has occurred or services
rendered; (3) the price to the buyer is fixed or determinable; and (4)
collectibility is reasonably assured. Determination of criteria (3) and (4) are
based on management&#8217;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. The Company assesses credit worthiness of customers based upon
prior history with the customer and assessment of financial condition. The
Company&#8217;s shipping terms are customarily FOB shipping point.</FONT></P>
<P><I><FONT face=serif size=2>Bad Debt</FONT></I></P>
<P><FONT face=serif size=2>The Company maintains allowances for doubtful
accounts for estimated losses resulting from the inability of its customers to
make required payments. Allowances for doubtful accounts are established based
upon review of specific account balances and historical experience. If the
financial condition of the Company&#8217;s customers were to deteriorate, resulting in
an impairment of their ability to make future payments, additional allowances
may be required. </FONT></P><I><FONT face=serif size=2>Inventories</FONT></I>
<P><FONT face=serif size=2>The Company provides for estimated obsolescence on
unmarketable inventory based upon assumptions about future demand and market
conditions. If actual demand and market conditions are less favorable than those
projected by management, additional inventory write downs may be required.
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><I><FONT face=serif size=2>Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed of</FONT></I></P>
<P><FONT face=serif size=2>The Company accounts for impairment of long-lived
assets in accordance with SFAS No. 144, </FONT><I><FONT face=serif
size=2>Accounting for the Impairment or Disposal of Long-Lived Assets.
</FONT></I><FONT face=serif size=2>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. 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. 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.
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><B><U><FONT face=serif size=2>Fiscal Year 2004 Results of
Operations</FONT></U></B><B><FONT face=serif size=2> </FONT></B></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Total revenues for
fiscal year 2004 of approximately $1,465,000 decreased by $934,000, or 38.9%,
from fiscal year 2003 revenues of approximately $2,399,000.</FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The revenue decrease
from the prior year was due principally to lower unit volume sales of medical
products (down 44%), partially offset by higher unit volume sales of non-medical
products (up 50%). Medical sales were lower due primarily to lower sales of
stereo endoscope products because of the loss of business from a major stereo
endoscope customer, as previously reported. Non-medical sales were higher due
primarily to higher sales of couplers for industrial use. </FONT></P>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">11</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV><A
name=page_12></A>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Revenues
from the Company&#8217;s largest customers, as a percentage of total revenues, were as
follows:</FONT></P>
<P align=center>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%">&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=middle colSpan=2><B><FONT face=serif
      size=2>2004</FONT></B> </TD>
    <TD align=middle>&nbsp; </TD>
    <TD noWrap align=middle colSpan=2><B><FONT face=serif
      size=2>2003</FONT></B> </TD>
    <TD align=middle>&nbsp; </TD>
    <TD noWrap align=middle colSpan=2><B><FONT face=serif
      size=2>2002</FONT></B> </TD></TR>
  <TR>
    <TD colSpan=11>&nbsp; </TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="100%" bgColor=#cbdbd1><FONT face=serif
      size=2>Customer
      A</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>24</FONT>
    </TD>
    <TD noWrap align=left bgColor=#cbdbd1><FONT face=serif
      size=2>%</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>17</FONT>
    </TD>
    <TD noWrap align=left bgColor=#cbdbd1><FONT face=serif
      size=2>%</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>18</FONT>
    </TD>
    <TD noWrap align=left bgColor=#cbdbd1><FONT face=serif
      size=2>%</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%"><FONT face=serif size=2>Customer
      B</FONT>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=right><FONT face=serif size=2>22</FONT> </TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=right><FONT face=serif size=2>2</FONT> </TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=right><FONT face=serif size=2>&#8212;</FONT></TD>
    <TD noWrap align=left>&nbsp; </TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="100%" bgColor=#cbdbd1><FONT face=serif
      size=2>Customer C</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>&#8212;</FONT>
</TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>44</FONT>
    </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>&#8212;</FONT></TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%"><FONT face=serif size=2>Customer
      D</FONT>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=right><FONT face=serif size=2>4</FONT> </TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=right><FONT face=serif size=2>5</FONT> </TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=right><FONT face=serif size=2>23</FONT> </TD>
    <TD noWrap align=left>&nbsp; </TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="100%" bgColor=#cbdbd1><FONT face=serif
      size=2>All Others</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>50</FONT>
    </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>32</FONT>
    </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>59</FONT>
    </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD noWrap align=right>
      <HR noShade SIZE=1>
    </TD>
    <TD noWrap align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD noWrap align=right>
      <HR noShade SIZE=1>
    </TD>
    <TD noWrap align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD noWrap align=right>
      <HR noShade SIZE=1>
    </TD>
    <TD noWrap align=left>&nbsp;</TD></TR>
  <TR>
    <TD colSpan=11>&nbsp; </TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="100%" bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>100</FONT>
    </TD>
    <TD noWrap align=left bgColor=#cbdbd1><FONT face=serif
      size=2>%</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>100</FONT>
    </TD>
    <TD noWrap align=left bgColor=#cbdbd1><FONT face=serif
      size=2>%</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>100</FONT>
    </TD>
    <TD noWrap align=left bgColor=#cbdbd1><FONT face=serif
      size=2>%</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD noWrap align=right>
      <HR noShade SIZE=2>
    </TD>
    <TD noWrap align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD noWrap align=right>
      <HR noShade SIZE=2>
    </TD>
    <TD noWrap align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD noWrap align=right>
      <HR noShade SIZE=2>
    </TD>
    <TD noWrap
align=left>&nbsp;</TD></TR></TABLE><BR></P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT
face=serif size=2>No other customer accounted for more than 10% of the Company&#8217;s
revenues in fiscal years 2004, 2003, and 2002. </FONT>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Gross profit (loss) for
fiscal year 2004 reflected an unfavorable change of approximately $925,000
compared to fiscal year 2003. Gross profit as a percentage of revenues decreased
from 13.6% in fiscal year 2003 to a negative 40.8% in fiscal year 2004. The
unfavorable change in gross profit (loss) was due primarily to lower sales
volume and provisions for slow moving and obsolete inventories, partially offset
by a lower manufacturing cost structure resulting from restructuring measures
implemented in fiscal year 2003. </FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif> </FONT><FONT face=serif
size=2>Research and development expenses increased by approximately $84,000, or
6.8%, during fiscal year 2004 compared to the previous year. The increase was
due to a higher level of resources being devoted to product development
activities.</FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Selling, general and
administrative expenses decreased by approximately $149,600, or 8.0%, during
fiscal year 2004 compared to the previous year. The decrease was due primarily
to lower outside consulting and legal expenses and the effects of the workforce
reduction in January 2004. </FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif> </FONT><FONT face=serif
size=2>The provision for asset impairment and restructuring in fiscal year 2004
of $52,208 consists of a provision for severance benefits paid in the quarter
ended March 31, 2004 related to the January 2004 workforce reduction of 15%, or
five employees. The provision for asset impairment and restructuring of $176,642
in fiscal year 2003, consists of a provision for severance benefits of $53,131
paid in the quarter ended December 31, 2002 related to the October 2002
workforce reduction of 16%, or six employees, and a provision for asset
impairment of $123,511 recorded in the quarter ended June 30, 2003, representing
a further writedown of assets held for sale which reflected the continuing
deterioration in the market for used telecommunications equipment.</FONT></P>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">12</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV><A
name=page_13></A>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The following table
sets forth the quarterly impacts and cash payments associated with the asset
impairment and restructuring provisions:</FONT></P>
<DIV>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%">&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=middle colSpan=18><B><FONT face=serif size=2>Provision
      For &#8211;</FONT></B> </TD></TR>
  <TR>
    <TD vAlign=bottom noWrap align=left>&nbsp;</TD>
    <TD vAlign=bottom>&nbsp;</TD>
    <TD vAlign=bottom noWrap align=middle colSpan=18>
      <HR noShade SIZE=1>
    </TD></TR>
  <TR vAlign=bottom align=middle>
    <TD noWrap width="100%">&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap colSpan=3><B><FONT face=serif size=2>Property &amp;</FONT></B>
    </TD>
    <TD>&nbsp; </TD>
    <TD noWrap>&nbsp; </TD>
    <TD noWrap>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap>&nbsp; </TD>
    <TD noWrap></TD>
    <TD noWrap>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap>&nbsp; </TD>
    <TD noWrap></TD>
    <TD noWrap>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap>&nbsp; </TD>
    <TD noWrap></TD>
    <TD noWrap>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%">&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=middle colSpan=3><B><FONT face=serif
      size=2>Equipment</FONT></B> </TD>
    <TD align=middle>&nbsp; </TD>
    <TD noWrap align=middle colSpan=2><B><FONT face=serif
      size=2>Patent</FONT></B>&nbsp; </TD>
    <TD align=middle>&nbsp; </TD>
    <TD noWrap align=middle colSpan=3><B><FONT face=serif
      size=2>Employee</FONT></B> </TD>
    <TD align=middle>&nbsp; </TD>
    <TD noWrap align=middle colSpan=3><B><FONT face=serif size=2>Idle
      Lease</FONT></B> </TD>
    <TD align=middle>&nbsp; </TD>
    <TD noWrap align=middle>&nbsp; </TD>
    <TD noWrap align=middle></TD>
    <TD noWrap align=middle>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%">&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=middle colSpan=3><B><FONT face=serif
      size=2>Writedown</FONT></B> </TD>
    <TD align=middle>&nbsp; </TD>
    <TD noWrap align=middle colSpan=2><B><FONT face=serif
      size=2>Writedown</FONT></B>&nbsp; </TD>
    <TD align=middle>&nbsp; </TD>
    <TD noWrap align=middle colSpan=3><B><FONT face=serif
      size=2>Severance</FONT></B> </TD>
    <TD align=middle>&nbsp; </TD>
    <TD noWrap align=middle colSpan=3><B><FONT face=serif
      size=2>Space</FONT></B> </TD>
    <TD align=middle>&nbsp; </TD>
    <TD noWrap align=middle colSpan=3><B><FONT face=serif
      size=2>Total</FONT></B> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD noWrap align=middle colSpan=3>
      <HR noShade SIZE=1>
    </TD>
    <TD align=middle>&nbsp;</TD>
    <TD noWrap align=middle colSpan=2>
      <HR noShade SIZE=1>
    </TD>
    <TD align=middle>&nbsp;</TD>
    <TD noWrap align=middle colSpan=3>
      <HR noShade SIZE=1>
    </TD>
    <TD align=middle>&nbsp;</TD>
    <TD noWrap align=middle colSpan=3>
      <HR noShade SIZE=1>
    </TD>
    <TD align=middle>&nbsp;</TD>
    <TD noWrap align=middle colSpan=3>
      <HR noShade SIZE=1>
    </TD></TR>
  <TR>
    <TD colSpan=21>&nbsp; </TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="100%" bgColor=#cbdbd1><FONT face=serif
      size=2>Provision Balance, June 30, 2002</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>&#8212;</FONT>
</TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1><FONT face=serif
      size=2>$</FONT>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif
      size=2>&#8212;</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1><FONT face=serif size=2>$</FONT></TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>&#8212;</FONT></TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif
      size=2>167,971</FONT> </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>$</FONT>
</TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif
      size=2>167,971</FONT> </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%"><FONT face=serif size=2>Quarter Ended
      &#8211;</FONT>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD noWrap align=left></TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD noWrap align=left></TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD noWrap align=left></TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD noWrap align=left></TD>
    <TD noWrap align=left>&nbsp; </TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="100%" bgColor=#cbdbd1>&nbsp; &nbsp; &nbsp;
      &nbsp;<FONT face=serif size=2>December 31, 2002</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1></TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp;</TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif
      size=2>&#8212;</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif
      size=2>53,131</FONT> </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>&#8212;</FONT></TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif
      size=2>53,131</FONT> </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%">&nbsp; &nbsp; &nbsp; &nbsp;<FONT
      face=serif size=2>June 30, 2003</FONT>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD noWrap align=right><FONT face=serif size=2>123,511</FONT> </TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left>&nbsp;</TD>
    <TD noWrap align=right><FONT face=serif size=2>&#8212;</FONT>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD noWrap align=right><FONT face=serif size=2>&#8212;</FONT></TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD noWrap align=right><FONT face=serif size=2>&#8212;</FONT></TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD noWrap align=right><FONT face=serif size=2>123,511</FONT> </TD>
    <TD noWrap align=left>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD noWrap align=left colSpan=2>
      <HR noShade SIZE=1>
    </TD>
    <TD noWrap align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD noWrap align=left colSpan=2>
      <HR noShade SIZE=1>
    </TD>
    <TD>&nbsp;</TD>
    <TD noWrap align=left colSpan=2>
      <HR noShade SIZE=1>
    </TD>
    <TD noWrap align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD noWrap align=left colSpan=2>
      <HR noShade SIZE=1>
    </TD>
    <TD noWrap align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD noWrap align=left colSpan=2>
      <HR noShade SIZE=1>
    </TD>
    <TD noWrap align=left>&nbsp;</TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="100%" bgColor=#cbdbd1><FONT face=serif
      size=2>Total Provision</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif
      size=2>123,511</FONT> </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp;</TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif
      size=2>&#8212;</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif
      size=2>53,131</FONT> </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>&#8212;</FONT></TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif
      size=2>176,642</FONT> </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%"><FONT face=serif size=2>Non-cash
      Charges</FONT>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD noWrap align=right><FONT face=serif size=2>(123,511</FONT> </TD>
    <TD noWrap align=left><FONT face=serif size=2>)</FONT> </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left>&nbsp;</TD>
    <TD noWrap align=right><FONT face=serif size=2>&#8212;</FONT>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD noWrap align=right><FONT face=serif size=2>&#8212;</FONT></TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD noWrap align=right><FONT face=serif size=2>&#8212;</FONT></TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD noWrap align=right><FONT face=serif size=2>(123,511</FONT> </TD>
    <TD noWrap align=left><FONT face=serif size=2>)</FONT> </TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="100%" bgColor=#cbdbd1><FONT face=serif
      size=2>Cash Payments</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>&#8212;</FONT></TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp;</TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif
      size=2>&#8212;</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif
      size=2>(53,131</FONT> </TD>
    <TD noWrap align=left bgColor=#cbdbd1><FONT face=serif size=2>)</FONT></TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif
      size=2>(167,971</FONT> </TD>
    <TD noWrap align=left bgColor=#cbdbd1><FONT face=serif size=2>)</FONT> </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif
      size=2>(221,102</FONT> </TD>
    <TD noWrap align=left bgColor=#cbdbd1><FONT face=serif size=2>)</FONT>
  </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD noWrap align=left colSpan=2>
      <HR noShade SIZE=1>
    </TD>
    <TD noWrap align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD noWrap align=left colSpan=2>
      <HR noShade SIZE=1>
    </TD>
    <TD>&nbsp;</TD>
    <TD noWrap align=left colSpan=2>
      <HR noShade SIZE=1>
    </TD>
    <TD noWrap align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD noWrap align=left colSpan=2>
      <HR noShade SIZE=1>
    </TD>
    <TD noWrap align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD noWrap align=left colSpan=2>
      <HR noShade SIZE=1>
    </TD>
    <TD noWrap align=left>&nbsp;</TD></TR>
  <TR>
    <TD colSpan=21>&nbsp; </TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="100%" bgColor=#cbdbd1><FONT face=serif
      size=2>Provision Balance, June 30, 2003</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>&#8212;</FONT></TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1><FONT face=serif
      size=2>$</FONT>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif
      size=2>&#8212;</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>&#8212;</FONT></TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>&#8212;</FONT></TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>$</FONT>
</TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>&#8212;</FONT></TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD></TR>
  <TR>
    <TD colSpan=21>&nbsp; </TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="100%" bgColor=#cbdbd1><FONT face=serif
      size=2>Quarter Ended &#8211;</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1></TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp;</TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1></TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1></TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1></TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT
      face=serif size=2>March 31, 2004</FONT>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD noWrap align=right><FONT face=serif size=2>&#8212;</FONT></TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left>&nbsp;</TD>
    <TD noWrap align=right><FONT face=serif size=2>&#8212;</FONT>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD noWrap align=right><FONT face=serif size=2>52,208</FONT> </TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD noWrap align=right><FONT face=serif size=2>&#8212;</FONT></TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD noWrap align=right><FONT face=serif size=2>52,208</FONT> </TD>
    <TD noWrap align=left>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD noWrap align=left colSpan=2>
      <HR noShade SIZE=1>
    </TD>
    <TD noWrap align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD noWrap align=left colSpan=2>
      <HR noShade SIZE=1>
    </TD>
    <TD>&nbsp;</TD>
    <TD noWrap align=left colSpan=2>
      <HR noShade SIZE=1>
    </TD>
    <TD noWrap align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD noWrap align=left colSpan=2>
      <HR noShade SIZE=1>
    </TD>
    <TD noWrap align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD noWrap align=left colSpan=2>
      <HR noShade SIZE=1>
    </TD>
    <TD noWrap align=left>&nbsp;</TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="100%" bgColor=#cbdbd1><FONT face=serif
      size=2>Total Provision</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>&#8212;</FONT></TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp;</TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif
      size=2>&#8212;</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif
      size=2>52,208</FONT> </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>&#8212;</FONT></TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif
      size=2>52,208</FONT> </TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%"><FONT face=serif size=2>Cash
      Payments</FONT>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD noWrap align=right><FONT face=serif size=2>&#8212;</FONT></TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left>&nbsp;</TD>
    <TD noWrap align=right><FONT face=serif size=2>&#8212;</FONT>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD noWrap align=right><FONT face=serif size=2>(52,208</FONT> </TD>
    <TD noWrap align=left><FONT face=serif size=2>)</FONT></TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD noWrap align=right><FONT face=serif size=2>&#8212;</FONT></TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=left>&nbsp; </TD>
    <TD noWrap align=right><FONT face=serif size=2>(52,208</FONT> </TD>
    <TD noWrap align=left><FONT face=serif size=2>)</FONT> </TD></TR>
  <TR>
    <TD vAlign=bottom noWrap align=left>&nbsp;</TD>
    <TD vAlign=bottom>&nbsp;</TD>
    <TD vAlign=bottom noWrap align=left colSpan=2>
      <HR noShade SIZE=1>
    </TD>
    <TD vAlign=bottom noWrap align=left>&nbsp;</TD>
    <TD vAlign=bottom>&nbsp;</TD>
    <TD vAlign=bottom noWrap align=left colSpan=2>
      <HR noShade SIZE=1>
    </TD>
    <TD vAlign=bottom>&nbsp;</TD>
    <TD vAlign=bottom noWrap align=left colSpan=2>
      <HR noShade SIZE=1>
    </TD>
    <TD vAlign=bottom noWrap align=left>&nbsp;</TD>
    <TD vAlign=bottom>&nbsp;</TD>
    <TD vAlign=bottom noWrap align=left colSpan=2>
      <HR noShade SIZE=1>
    </TD>
    <TD vAlign=bottom noWrap align=left>&nbsp;</TD>
    <TD vAlign=bottom>&nbsp;</TD>
    <TD vAlign=bottom noWrap align=left colSpan=2>
      <HR noShade SIZE=1>
    </TD>
    <TD vAlign=bottom noWrap align=left>&nbsp;</TD></TR>
  <TR>
    <TD colSpan=21>&nbsp; </TD></TR>
  <TR vAlign=bottom bgColor=#ccffcc>
    <TD noWrap align=left width="100%" bgColor=#cbdbd1><FONT face=serif
      size=2>Provision Balance, June 30, 2004</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>&#8212;</FONT></TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1><FONT face=serif size=2>$</FONT></TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif
      size=2>&#8212;</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>&#8212;</FONT></TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=left bgColor=#cbdbd1><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>&#8212;</FONT></TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>$</FONT>
</TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>&#8212;</FONT></TD>
    <TD noWrap align=left bgColor=#cbdbd1>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD noWrap align=left colSpan=2>
      <HR noShade SIZE=2>
    </TD>
    <TD noWrap align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD noWrap align=left colSpan=2>
      <HR noShade SIZE=2>
    </TD>
    <TD>&nbsp;</TD>
    <TD noWrap align=left colSpan=2>
      <HR noShade SIZE=2>
    </TD>
    <TD noWrap align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD noWrap align=left colSpan=2>
      <HR noShade SIZE=2>
    </TD>
    <TD noWrap align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD noWrap align=left colSpan=2>
      <HR noShade SIZE=2>
    </TD>
    <TD noWrap align=left>&nbsp;</TD></TR></TABLE></DIV><BR>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Interest income
decreased by approximately $47,400 or 72.4% during fiscal year 2004 compared to
the previous year. The decrease was due to the lower base of cash and cash
equivalents.</FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Interest expense
consists of interest on capital lease obligations and decreased due to the
liquidation of capital lease obligations during fiscal year 2004. </FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The income tax
provisions in fiscal years 2004 and 2003 represent the minimum statutory state
income tax liability. </FONT></P>
<P><B><U><FONT face=serif size=2>Fiscal Year 2003 Results of
Operations</FONT></U></B><B><FONT face=serif size=2> </FONT></B></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Total revenues for
fiscal year 2003 of approximately $2,399,000 increased by $625,000, or 35.2%,
from fiscal year 2002 revenues of $1,774,000.</FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The revenue increase
from the prior year was due principally to higher unit volume sales of medical
products (up 57%), partially offset by lower unit volume sales of non-medical
products (down 60%). Medical sales were higher due primarily to higher sales of
stereo endoscopes and cameras. Non-medical sales were lower due primarily to the
discontinuation during the last fiscal year of sales of telecommunication
products. </FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Gross profit for fiscal
year 2003 reflected a favorable change of approximately $1,676,000, compared to
fiscal year 2002. Gross profit as a percentage of revenues increased from a
negative 76.0% in fiscal year 2002 to 13.6 % in fiscal year 2003. The favorable
change in gross profit was due primarily to (1) a provision for excess and
obsolete inventories of DWDM filters and DWDM filter test instrumentation of
approximately $540,000 recorded in the quarter ended September 30,
2001</FONT><FONT face=serif>; </FONT><FONT face=serif size=2>(2) lower fixed
manufacturing costs</FONT><FONT face=serif> </FONT><FONT face=serif
size=2>resulting <FONT face=serif size=2>from the cessation of operations in the
Company&#8217;s optical thin film technology facility and reductions in staff; and (3)
the higher overall sales volume. </FONT></FONT></P>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">13</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV><A
name=page_14></A>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Research and
development expenses decreased by approximately $1,036,000, or 45.6%, during
fiscal year 2003 compared to the previous year. During the fiscal year 2002,
research and development expenses consisted primarily of development efforts
related to DWDM filters used in telecommunications systems. The decrease in the
fiscal year 2003 was due to discontinuation of the development of DWDM filters,
as reflected in reductions in staff, and the remaining R&amp;D resources being
redeployed toward development of new medical products.</FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Selling, general and
administrative expenses decreased by approximately $199,000, or 9.6%, during
fiscal year 2003 compared to the previous year. The decrease was due primarily
to lower sales and marketing expenses, partially offset by approximately $40,000
in expenses related to effecting a 1-for-6 reverse stock split in the quarter
ended March 31, 2003. </FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2> The provision for
asset impairment and restructuring of $176,642 in fiscal year 2003 consists of a
provision for severance benefits of $53,131 paid in the quarter ended December
31, 2002 related to the October 2002 workforce reduction of 16%, or six
employees, and a provision for asset impairment of $123,511 recorded in the
quarter ended June 30, 2003, representing a further writedown of assets held for
sale which reflects the continuing deterioration in the market for used
telecommunications equipment. The provision for asset impairment and
restructuring of $4,445,021 in fiscal year 2002 consists of (1) a provision for
restructuring costs of $402,065, representing the then - present value of future
lease payments related to idle space in the Company&#8217;s Optical Thin Films
Technology Center, and employee severance costs; and (2) a provision for asset
impairment of $4,042,956, representing a writedown to the lower of carrying
value or fair market va lue less estimated selling costs of certain of the
Company&#8217;s property and equipment invested in its optical thin films coating
product line, and the writeoff of certain patent costs. </FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The loss on sale of
assets held for sale of $19,171 in fiscal year 2003 represents the loss on sales
of a portion of the property and equipment held for sale, which formerly was
invested in the Company&#8217;s telecommunications product line. The Company received
net proceeds from these sales of approximately $553,000 in the year ended June
30, 2003.</FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Interest income
decreased by approximately $127,000, or 66.0%, during fiscal year 2003 compared
to the previous year. The decrease was due to the lower base of cash and cash
equivalents and lower interest rates.</FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Interest expense
consists of interest on capital lease obligations and, for fiscal year 2002,
imputed interest on accrued restructuring costs related to the present value of
future lease payments on idle space. Interest expense decreased by $13,069, or
65.5%, from fiscal year 2002 due primarily to the elimination of imputed
interest on restructuring costs which were paid in early fiscal year
2003.</FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The income tax
provisions in fiscal years 2003 and 2002 represent the minimum statutory state
income tax liability. </FONT></P>
<P><B><U><FONT face=serif size=2>Liquidity and Capital
Resources</FONT></U></B></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=sans-serif size=2> </FONT><FONT
face=serif size=2>The Company has incurred significant operating losses during
the last eight fiscal years. This trend was primarily the result of the loss of
several significant customers, completion of several large nonrecurring
government contracts, and operating losses and provision for asset impairment,
restructuring, and inventory write-downs associated with the downturn in demand
for optical filters used in telecommunications systems. In fiscal 1998, the
Company began making significant investments in research and development and
capital purchases for new products. In August 1999 and March 2000, the Company
raised gross proceeds of approximately $16 million of additional cash through
the issuance of common stock.</FONT></P>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">14</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV><A
name=page_15></A>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>In the past three
fiscal years, the Company has implemented a number of restructuring and cost
saving measures in an effort to align costs with revenues and strengthen
financial performance. Full-time employee headcount has been reduced from 78 at
June 30, 2001 to 30 at June 30, 2004. The Company has discontinued the
development and manufacturing of telecommunications products, canceled the lease
on its Optical Thin Films Technology Center, and written down and/or sold
certain of the property, equipment and inventories invested in its
telecommunications business, and has implemented other cost reduction measures.
As a result of these actions, the Company has incurred asset impairment,
restructuring and inventory write-down provisions of approximately $4,985,000,
$177,000 and $52,000 for the years ended June 30, 2002, 2003, and 2004
respectively, and has received net proceeds from the sale of assets held for
sale of approximately $553,000 during the yea r ended June 30, 2003. In
addition, the Company will continue its review of other expense areas to
determine where additional reductions in discretionary spending can be
achieved.</FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>In July 2004, the
Company completed a rights offering to stockholders of record at June 7, 2004 by
issuing 5,256,159 shares of common stock. Net cash proceeds to the Company
(after offering expenses of $177,176) were $5,078,983. </FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>For the year ended June
30, 2004, the Company&#8217;s cash and cash equivalents decreased by approximately
$3,161,000 to $343,000. The decrease in cash and cash equivalents was due to
cash used by operating activities of approximately $3,074,000, capital
expenditures of approximately $34,000, repayment of capital lease obligation and
other of approximately $4,000, expenditures for other assets (primarily patents)
of $31,000 and payment of deferred financing costs of $18,000. The Company
believes, based on its operating and strategic plans and the net proceeds
received in July 2004 from its rights offering to stockholders, that it will
have sufficient funds to conduct operations through at least the next fiscal
year.</FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2> Contractual cash
commitments for the fiscal years subsequent to June 30, 2004 are summarized as
follows:</FONT></P>
<DIV>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%">&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD noWrap align=middle colSpan=2><B><FONT face=serif
      size=2>2005</FONT></B>&nbsp; </TD>
    <TD align=middle>&nbsp; </TD>
    <TD noWrap align=middle colSpan=2><B><FONT face=serif
      size=2>Thereafter</FONT></B>&nbsp; </TD>
    <TD align=middle>&nbsp; </TD>
    <TD noWrap align=middle colSpan=2><B><FONT face=serif
      size=2>Total</FONT></B>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%" bgColor=#cbdbd1><FONT face=serif
      size=2>Operating leases</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif
      size=2>$</FONT>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif
      size=2>27,454</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif size=2>$</FONT>
</TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif
      size=2>2,183</FONT>&nbsp; </TD>
    <TD bgColor=#cbdbd1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif
      size=2>$</FONT>&nbsp; </TD>
    <TD noWrap align=right bgColor=#cbdbd1><FONT face=serif
      size=2>29,637</FONT>&nbsp; </TD></TR></TABLE></DIV><BR>
<P><B><U><FONT face=serif size=2>Trends and Uncertainties That May Affect Future
Results</FONT></U></B></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT face=serif size=2> </FONT></B><FONT
face=serif size=2>For the quarter ended June 30, 2004, cash and cash equivalents
decreased by approximately $602,000 compared to a decrease of approximately
$781,000 for the previous quarter ended March 31, 2004. Cash disbursements
during the quarter ended March 31, 2004 included approximately $52,000 paid for
employee severance costs. </FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2> Capital equipment
expenditures during the year ended June 30, 2004 were approximately $33,600, up
21% from the $28,000 for fiscal year 2003. Future capital equipment expenditures
will be dependent upon future sales and success of on-going research and
development efforts.</FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2> For the quarter ended
June 30, 2004, research and development expenses were approximately $339,000, up
1.8% from the $333,000 for the quarter ended June 30, 2003. It is anticipated
that the quarterly level of R&amp;D expenses for the foreseeable future will
remain at this lower level, but is ultimately dependent upon the Company&#8217;s
assessment of new product opportunities.</FONT></P>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2> The Company expects
its recent pattern of quarter-to-quarter revenue fluctuations to continue, due
to the uncertain timing of orders from customers and their size in relation to
total revenues. The Company continues to move forward with new products and
technical innovations, in particular, the development of a new generation
(patent pending) of its world-class product line of 3-D endoscopes, the
development of a new prototype 2.7 mm endoscope, and new instruments utilizing
the Company&#8217;s new micro-precision</FONT><SUP><FONT face=serif
size=1>TM</FONT></SUP><FONT face=serif size=2> lens <FONT face=serif
size=2>technology (patent pending) for endoscopes under 1 mm. The Company
continues to explore potential applications of single-molecule technology and
nanotechnology. </FONT></FONT></P>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">15</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV><A
name=page_16></A>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2> The Company believes
that the recent introduction of several new products, along with new and ongoing
customer relationships, will generate additional revenues, which are required in
order for the Company to achieve profitability. If these additional revenues are
not achieved on a timely basis, the Company will be required and is prepared to
implement further cost reduction measures, as necessary.</FONT></P>
<DIV>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD><FONT face=serif size=2>ITEM 7. </FONT><FONT face=serif
      size=2>&nbsp;</FONT></TD>
    <TD><U><FONT face=serif size=2>CONSOLIDATED FINANCIAL
      STATEMENTS</FONT></U><FONT face=serif size=2>: The Consolidated Financial
      Statements are filed on pages 17 through 36 of this Form 10-KSB.
  </FONT></TD></TR></TABLE></DIV>
<P>&nbsp;</P>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">16</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV><A
name=page_17></A>
<P><B><FONT face=serif>PRECISION OPTICS CORPORATION, INC. AND
SUBSIDIARIES</FONT></B></P>
<P><FONT face=serif>Consolidated Financial Statements<BR>as of June 30, 2004 and
2003<BR></FONT><FONT face=serif>Together with Independent Registered Public
Accounting Firm&#8217;s Report</FONT></P>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">17</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV><A
name=page_18></A>
<P align=center><B><FONT face=serif>Report of Independent Registered Public
Accounting Firm</FONT></B></P>
<P><FONT face=serif size=2>The Board of Directors and Shareholders<BR>Precision
Optics Corporation, Inc.: </FONT></P>
<P><FONT face=serif size=2>We have audited the accompanying consolidated balance
sheets of Precision Optics Corporation, Inc. and subsidiaries as of June 30,
2004 and 2003 and the related consolidated statements of operations,
stockholders&#8217; equity and cash flows for each of the years in the three-year
period ended June 30, 2004. These consolidated financial statements are the
responsibility of the Company&#8217;s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.</FONT></P>
<P><FONT face=serif size=2>We conducted our audits in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
</FONT></P>
<P><FONT face=serif size=2>In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the consolidated
financial position of Precision Optics Corporation, Inc. and subsidiaries as of
June 30, 2004 and 2003 and the results of their operations and their cash flows
for each of the years in the three-year period ended June 30, 2004 in conformity
with accounting principles generally accepted in the United States of America.
</FONT></P>
<P align=center><FONT face=serif size=2>/s/ KPMG LLP</FONT></P>
<P><FONT face=serif size=2>Boston, Massachusetts<BR>August 31, 2004 </FONT></P>
<P align=center><BR>&nbsp;</P>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">18</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT style="DISPLAY: inline; FONT-FAMILY: Times New Roman, serif"
size=2><B>PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Consolidated
Balance Sheets</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">June
30, 2004 and 2003</FONT><BR>
<DIV>
<TABLE cellSpacing=0 cellPadding=0 width="100%"
border=0></TABLE></DIV></DIV></DIV>
<DIV>
<DIV>&nbsp;</DIV>
<DIV align=left>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="21%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"><B>ASSETS</B></FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="10%"
    colSpan=2>
      <P align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;<B>2004</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <P align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</P></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="10%"
    colSpan=2>
      <P align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;<B>2003</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="4%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="28%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"><B>LIABILITIES
      AND STOCKHOLDERS' EQUITY</B></FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="10%"
    colSpan=2>
      <P align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;<B>2004</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <P align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</P></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="10%"
    colSpan=2>
      <P align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;<B>2003</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="21%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Current
      Assets:</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="4%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="28%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Current
      Liabilities:</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="21%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Cash
      and cash equivalents</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">343,260</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">3,504,414</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="4%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="28%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&nbsp;&nbsp;
      Current portion of capital lease obligation</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;
      </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">3,826</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="21%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left>&nbsp;</DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="4%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="28%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&nbsp;&nbsp;
      Accounts payable</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">235,050</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">141,398</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="21%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Accounts
      receivable (net of allowance for doubtful accounts of&nbsp;&nbsp;
      approximately $155,000 in 2004 and 2003).</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">80,195</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">191,669</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="4%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="28%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&nbsp;&nbsp;
      Accrued employee compensation</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">230,110
      </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">213,543</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="21%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Inventories</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">917,998</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1,257,288</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="4%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="28%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&nbsp;&nbsp;
      Accrued professional services</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">75,439</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">118,284</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="21%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Prepaid
      expenses</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">80,646</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">91,213</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="4%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="28%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&nbsp;&nbsp;
      Accrued warranty expense</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">50,000</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">50,000</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="21%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Deferred
      financing costs</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">171,885</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="4%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="28%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&nbsp;&nbsp;
      Other accrued liabilities</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">2,743
      </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">6,966</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
    width="21%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Assets
      held for sale</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
      width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">152,550</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
      width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="4%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right
    width="28%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
      width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt">&nbsp;</DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
      width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt">&nbsp;</DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
      width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="21%"></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="4%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=right
    width="28%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      Total current liabilities</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">593,342</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">534,017</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
    width="21%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 6pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left>&nbsp;</DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt">&nbsp;</DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="4%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right
    width="28%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="21%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Total
      current assets</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1,593,984</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">5,197,134</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="4%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=right
    width="28%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="21%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="4%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="28%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="21%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Property
      and Equipment, at cost:</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="4%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=right
    width="28%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Other</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1,555</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="21%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Machinery
      and equipment</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">3,507,065</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">3,323,760</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="4%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="28%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="21%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Leasehold
      improvements</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">553,596</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">551,796</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="4%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="28%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Commitments
      (Note 2)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt">&nbsp;</DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="21%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Furniture
      and fixtures</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">96,831</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">95,781</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="4%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="28%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="21%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Vehicles</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">42,343</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">42,343</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="4%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=right
    width="28%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Stockholders&#8217;
      Equity:</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
width="21%"></TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="4%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="28%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&nbsp;&nbsp;
      Common stock, $0.01 par value-</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="21%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">4,199,835</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">4,013,680</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="4%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="28%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      Authorized&#8212;20,000,000 shares </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
    width="21%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Less&#8212;Accumulated
      depreciation and amortization</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">3,920,593</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">3,723,350</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
      width="4%">&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right
    width="28%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Issued and
      outstanding&#8212;1,752,053 shares
      at<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      June 30, 2004 and 2003 </FONT></DIV></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">17,521</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">17,521</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="21%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">279,242</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">290,330</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="4%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=right
    width="28%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&nbsp;&nbsp;
      Additional paid-in capital </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">27,770,175
      </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">27,770,175</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
    width="21%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 42pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="4%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right
    width="28%">
      <DIV align=left>&nbsp;&nbsp;<FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Accumulated
      deficit</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(
      26,283,724</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(
      22,599,648</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="21%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Other
      Assets:</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="4%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="28%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
    width="21%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Cash
      surrender value of life insurance policies</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">23,032</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">39,384</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="4%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=right
    width="28%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&nbsp;&nbsp;
      Total stockholders&#8217; equity</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1,503,972</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">5,188,048</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="21%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Patents,
      net</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">201,056</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">196,772</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="4%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=right
    width="28%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="21%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="4%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="28%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="21%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Total
      other assets</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">224,088</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">236,156</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="4%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=right
    width="28%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="21%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="4%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="28%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="21%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 6pt; TEXT-INDENT: 6pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left>&nbsp;</DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$
      </FONT></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
      width="9%"><FONT size=2>2,097,314</FONT>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
      width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">5,723,620</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
      width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="4%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=right
    width="28%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">2,097,314</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
      width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">5,723,620</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
      width="1%">&nbsp;</TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"><I>The
accompanying notes are an integral part of these consolidated financial
statements.</I></FONT></DIV></DIV>
<DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>
<P>&nbsp;</P>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">19</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<P><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><B>PRECISION
OPTICS CORPORATION, INC. AND SUBSIDIARIES</B></FONT></P></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Consolidated
Statements of Operations</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">for
the Years Ended June 30, 2004, 2003, and 2002 </FONT></DIV></DIV>
<DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%"
    colSpan=2>
      <P align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;<B>2004</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="2%"><P align=center>&nbsp;</P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%"
    colSpan=2>
      <P align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;<B>2003</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="2%"><P align=center>&nbsp;</P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%"
    colSpan=2>
      <P align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;<B>2002</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Revenues</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1,464,964</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">2,399,217</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1,774,283</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
    width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Cost
      of Goods Sold</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">2,062,902</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">2,072,238</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">3,123,196</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Gross
      profit (loss)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(597,938</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">326,979</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(1,348,913</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Research
      and Development Expenses</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1,319,345</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1,235,252</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">2,270,880</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Selling,
      General and Administrative Expenses</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1,731,713</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1,881,313</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">2,079,994</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Provision
      for Asset Impairment and Restructuring</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">52,208</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">176,642</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">4,445,021</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Loss
      on Sale of Assets Held for Sale</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">19,171</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Total
      operating expenses</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">3,103,266
      </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">3,312,378</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">8,795,895</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Operating
      loss</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(3,701,204</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(2,985,399</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(10,144,808</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Interest
      Income</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">18,089</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">65,443</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">192,241</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
    width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Interest
      Expense</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(49</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(6,894</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(19,963</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Loss
      before provision for income taxes</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(3,683,164</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(2,926,850</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(9,972,530</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
    width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Provision
      for Income Taxes</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">912</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">912</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">912</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Net
      loss</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(3,684,076</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(2,927,762</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(9,973,442</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
    width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Basic
      and Diluted Loss per Share </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(2.10</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(1.67</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(5.69</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Weighted
      Average Common Shares Outstanding </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1,752,053</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
      width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1,752,053</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
      width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1,752,053</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
      width="1%">&nbsp;</TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"><I>The
accompanying notes are an integral part of these consolidated financial
statements</I></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><I>.</I></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">20</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><B>PRECISION
OPTICS CORPORATION, INC. AND SUBSIDIARIES</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Consolidated
Statements of Stockholders&#8217; Equity</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">for
the Years Ended June 30, 2004, 2003 and 2002 </FONT><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR>
    <TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left
    width="43%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 6pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center>&nbsp;</DIV></TD>
    <TD style="BORDER-BOTTOM: #000000 thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left
    width="10%" colSpan=2>
      <P align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;Number
      of Shares &nbsp;</FONT></P></TD>
    <TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left
    width="1%">
      <P align=center>&nbsp;</P></TD>
    <TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left
    width="10%" colSpan=2>
      <P align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;Common
      Stock </FONT></P></TD>
    <TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left
    width="1%">
      <P align=center>&nbsp;</P></TD>
    <TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left
    width="10%" colSpan=2>
      <P align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;Additional
      Paid-in Capital </FONT></P></TD>
    <TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left
    width="1%">
      <P align=center>&nbsp;</P></TD>
    <TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left
    width="10%" colSpan=2>
      <P align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;Accumulated
      Deficit</FONT></P></TD>
    <TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left
    width="1%">
      <P align=center>&nbsp;</P></TD>
    <TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left
    width="10%" colSpan=2>
      <P align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;Total
      Stockholders&#8217; Equity</FONT></P></TD>
    <TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="43%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="43%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left></DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Balance,
      June 30, 2001</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1,752,053</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">17,521</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">27,770,175</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(9,698,444</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">18,089,252</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="43%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
    width="43%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 12pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Net
      loss</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(9,973,442</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(9,973,442</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="43%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left></DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Balance,
      June 30, 2002</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1,752,053</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">17,521</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">27,770,175</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(19,671,886</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">8,115,810</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="43%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
    width="43%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;
      Net loss</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(2,927,762</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(2,927,762</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="43%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left></DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Balance,
      June 30, 2003</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1,752,053</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">17,521</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">27,770,175</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(22,599,648
      </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">5,188,
      048 </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
    width="43%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left>&nbsp;</DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;
      Net loss</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(3,684,076</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(3,684,076</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="43%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left></DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Balance,
      June 30, 2004</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1,752,053</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
      width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">17,521</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
      width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">27,770,175</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
      width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(26,283,724
      </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1,503,972
      </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
      width="1%">&nbsp;</TD></TR></TABLE></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"><I>The
accompanying notes are an integral part of these consolidated financial
statements.</I></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><EM></EM><BR>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">21</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV>&nbsp;</DIV>
<DIV><BR>
<P><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><B>PRECISION
OPTICS CORPORATION, INC. AND SUBSIDIARIES</B></FONT></P></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Consolidated
Statements of Cash Flows for the </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Years
Ended June 30, 2004, 2003, and 2002</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      <P align=center>&nbsp;</P></FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%"
    colSpan=2>
      <P align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;<B>2004</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      <P align=center>&nbsp;</P></FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%"
    colSpan=2>
      <P align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;<B>2003</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      <P align=center>&nbsp;</P></FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%"
    colSpan=2>
      <P align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;<B>2002</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="57%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Cash
      Flows from Operating Activities:</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 12pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Net
      loss</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(3,684,076</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(2,927,762
      </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(9,973,442</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 12pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Adjustments
      to reconcile net loss to net cash used in operating
      activities-</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Depreciation
      and amortization</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">240,846</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">265,102</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">593,491</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Provision
      for asset impairment and restructuring</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">176,642</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">4,445,021</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Provision
      for inventory write-down</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">500,000</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">540,000</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Loss
      on sale of assets held for sale</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">19,171</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Other</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(6,872</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(25,345</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Changes
      in operating assets and liabilities-</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 42pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Accounts
      receivable, net</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">111,474</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">182,830</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">628,997</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 42pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Inventories</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(160,710</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(248,279</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(24,890</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 42pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Prepaid
      expenses</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">10,567</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">2,361</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">16,186</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 42pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Refundable
      income taxes</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">13,849</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(13,849</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 42pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Accounts
      payable </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(59,655
      </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">22,497</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(465,885</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 42pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Accrued
      restructuring expense</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(221,102</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(234,094</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 42pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Customer
      advances</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(30,000</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">30,000</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
    width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 42pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Other
      accrued expenses</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(32,055
      </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(13,533
      </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(29,467</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 42pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Net
      cash used in operating activities</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(3,073,609</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(2,765,096</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(4,513,277</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Cash
      Flows from Investing Activities:</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Purchases
      of property and equipment</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(33,605</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(27,719
      </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(90,818</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Net
      proceeds from sale of assets held for sale</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">553,091</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Increase
      in other assets</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(31,536</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(48,686</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(56,798</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
    width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Net
      cash provided by (used in) investing activities</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(65,141</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">476,686
      </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(147,616</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Cash
      Flows from Financing Activities:</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Repayment
      of capital lease obligation and other</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(3,826</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(32,777
      </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(43,804</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Payment
      of deferred financing costs</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(18,578</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
    width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Net
      cash used in financing activities</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(22,404
      </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(32,777
      </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(43,804</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Net
      Decrease in Cash and Cash Equivalents</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(3,161,154</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(2,321,187
      </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(4,704,697</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
    width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Cash
      and Cash Equivalents, beginning of year</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">3,504,414</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">5,825,601</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">10,530,298</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Cash
      and Cash Equivalents, end of year</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">343,260</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
      width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">3,504,414
      </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
      width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">5,825,601</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
      width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Supplemental
      Disclosure of Cash Flow Information:</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 12pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Cash
      paid during the year for-</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
    width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Interest</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">49</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
      width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">6,894</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
      width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">19,963</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
      width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Income
      taxes</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
      width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1,
      824</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
      width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">912</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
      width="1%">&nbsp;</TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"><I>The
accompanying notes are an integral part of these consolidated financial
statements.</I></FONT></DIV>
<DIV><BR>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">22</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV></DIV>
<P style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>PRECISION
OPTICS CORPORATION, INC. AND SUBSIDIARIES</B></FONT></P>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notes to
Consolidated Financial Statements </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>(1)&nbsp;&nbsp;&nbsp;&nbsp;
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Nature of Business and Liquidity</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Precision
Optics Corporation, Inc. (the "Company") designs, develops, manufactures and
sells specialized optical systems and components and optical thin-film coatings.
The Company conducts business in one industry segment only and its customers are
primarily domestic. The Company&#8217;s products and services fall into two principal
areas: (i) medical products for use by hospitals and physicians and (ii)
advanced optical system design and development services and products used by
industrial customers.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Company has incurred significant operating losses during the last eight fiscal
years. This trend was primarily the result of the loss of several significant
customers, completion of several large nonrecurring government contracts, and
operating losses and provision for asset impairment, restructuring, and
inventory write-downs associated with the downturn in demand for optical filters
used in telecommunications systems. In fiscal 1998, the Company began making
significant investments in research and development and capital purchases for
new products. In August 1999 and March&nbsp;2000, the Company raised gross
proceeds of approximately $16&nbsp;million of additional cash through the
issuance of common stock. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In the
past three fiscal years, the Company has implemented a number of restructuring
and cost saving measures in an effort to align costs with revenues and
strengthen financial performance. Full-time employee headcount has been reduced
from 78 at June 30, 2001 to 30 at June 30, 2004. The Company has discontinued
the development and manufacturing of telecommunications products, canceled the
lease on its Optical Thin Films Technology Center, and written down and/or sold
certain of the property, equipment and inventories invested in its
telecommunications business. As a result of these actions, the Company has
incurred asset impairment, restructuring and inventory write-down provisions of
approximately $4,985,000, $177,000 and $52,000 for the years ended June 30,
2002, 2003, and 2004, respectively, and has received net pro ceeds from the sale
of assets held for sale of approximately $553,000 during the year ended June 30,
2003. In addition, the Company will continue its review of other expense areas
to determine where additional reductions in discretionary spending can be
achieved. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Company&#8217;s current sources of liquidity consist of its cash and cash equivalents
and accounts receivable. At June 30, 2004 the Company had $343,260 in cash and
cash equivalents and $80,195 in accounts receivable. In July 2004, the Company
completed a rights offering to stockholders of record at June 7, 2004 by issuing
5,256,159 shares of common stock. Net cash proceeds to the Company (after
offering costs of $177,176) were $5,078,983.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Company expects its recent pattern of quarter-to-quarter revenue fluctuations to
continue, due to the uncertain timing of individual orders and their size in
relation to total revenues. The Company remains confident in the value of its
technology and expertise both in medical and surgical applications and
elsewhere. In addition, despite strict controls on R&amp;D spending, the Company
continues to move forward with new products and technical innovations.
</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Company believes that the recent introduction of several new products, along
with new and on-going customer relationships, will generate additional revenues,
which are required in order for the Company to achieve profitability. If these
additional revenues are not achieved on a timely basis, the Company will be
required and is prepared to implement further cost reduction measures, as
necessary. The Company believes, based on its operating and strategic plans,
that it will have sufficient funds to conduct operations through at least the
next fiscal year.</FONT></DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">23</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<P><BR>
<P></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>PRECISION
OPTICS CORPORATION, INC. AND SUBSIDIARIES</B></FONT></P></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: -30pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notes to
Consolidated Financial Statements </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT size=2></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left></FONT></DIV></DIV></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -30pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Principles of Consolidation</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
accompanying consolidated financial statements include the accounts of the
Company and its two wholly owned subsidiaries. All intercompany accounts and
transactions have been eliminated in consolidation. All shares and per share
data reflect the effects of a 1-for-6 reverse stock split that became effective
on January 29, 2003.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Revenues</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
December 2003, the Securities and Exchange Commission issued Staff Accounting
Bulletin ("SAB") No. 104 which establishes guidance in applying generally
accepted accounting principles to revenue recognition in financial statements
and was effective for the Company&#8217;s fiscal year 2004. SAB No. 104 requires that
four basic criteria must be met before revenue can be recognized: (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. The Company&#8217;s shipping terms are
customarily FOB shipping point. The Company&#8217;s revenue recognition practices
comply with the guidance in the bulletin. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Revenues
for industrial and medical products sold in the normal course of business are
recognized upon shipment when delivery terms are FOB shipping point and all
other revenue recognition criteria have been met. Contract revenues including
revenues from customer-sponsored research and development contracts, are
recognized under the percentage-of-completion method. The percentage of
completion is determined by computing the percentage of the actual cost of work
performed to the anticipated total contract costs. When the estimate on a
contract indicates a loss, the Company&#8217;s policy is to record the entire
estimated loss in the current period. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -30pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cash and Cash Equivalents</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Company includes in cash equivalents all highly liquid investments with original
maturities of three months or less at the time of acquisition. Cash equivalents
of $298,837 and $3,394,449 at June 30, 2004 and 2003, respectively, consist
primarily of overnight repurchase agreements, money market funds, and United
States Treasury bills.</FONT><BR></DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">24</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: -30pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>PRECISION
OPTICS CORPORATION, INC. AND SUBSIDIARIES</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notes to
Consolidated Financial Statements </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT size=2></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left></FONT></DIV></DIV></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -30pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Inventories</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Inventories
are stated at the lower of cost (first-in, first-out) or market and include
material, labor and manufacturing overhead. The components of inventories at
June 30, 2004 and 2003 are as follows:</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="71%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%"
    colSpan=2>
      <P align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;<B>2004</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="2%"><P align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%"
    colSpan=2>
      <P align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;<B>2003</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="71%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="11%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="11%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="71%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Raw
      material</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">345,483</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">679,647
      </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="71%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Work-in-progress</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">307,522</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">379,636</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="71%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Finished
      goods</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">264,993</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">198,005</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
      width="71%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
      width="11%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
      width="11%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
    width="71%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">917,998</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
      width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,257,288</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Company provides for estimated obsolescence on unmarketable inventory based upon
assumptions about future demand and market conditions. If actual demand and
market conditions are less favorable than those projected by management,
additional inventory write downs may be required. 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></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">During
fiscal years 2004 and 2002, the Company recorded, in cost of goods sold, pretax
non-cash provisions for slow-moving and obsolete inventories of approximately
$500,000 and $540,000, respectively. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -30pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>(f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Property and Equipment</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Property
and equipment are recorded at cost. Maintenance and repair items are expensed as
incurred. The Company provides for depreciation and amortization by charges to
operations, using the straight-line and declining-balance methods, which
allocate the cost of property and equipment over the following estimated useful
lives: </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle
    width="40%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>Asset
      Classification</B></FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: medium none" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
width="40%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>Estimated
      Useful Life</B></FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="40%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Machinery
      and equipment</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="40%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3-7
      years</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="40%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Leasehold
      improvements</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="40%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Shorter
      of lease term or estimated useful life </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="40%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Furniture
      and fixtures</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="40%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5
      years</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="40%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Vehicles</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="40%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3
      years</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR></TABLE></DIV></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Amortization
of assets under capital leases is included in depreciation and amortization
expense. Depreciation and amortization expense was $197,242, $228,056, and
$552,116 for the years ended June 30, 2004, 2003 and 2002, respectively.
<BR></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -30pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>(g)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Significant Customers and Concentration of Credit Risk</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Statement
of Financial Accounting Standards (SFAS) No. 105, <I>Disclosure of Information
about Financial Instruments with Off-Balance-Sheet Risk and Financial
Instruments with Concentrations of Credit Risk, </I>requires disclosure of any
significant off-balance sheet and credit risk </FONT></DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">25</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<P><BR>
<P></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>PRECISION
OPTICS CORPORATION, INC. AND SUBSIDIARIES</B></FONT></P></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notes to
Consolidated Financial Statements </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">concentrations.
Financial instruments that subject the Company to credit risk consist primarily
of cash equivalents and trade accounts receivable. The Company places its
investments in highly rated financial institutions. The Company has not
experienced any losses on these investments to date. At June 30, 2004,
receivables from the Company&#8217;s largest customers were 47%, 18%, 13%, and 12% ,
respectively of the total accounts receivable. At June 30, 2003, receivables
from the Company&#8217;s largest customer were approximately 55% of the total accounts
receivable. No other customer accounted for more than 10% of the Company&#8217;s
receivables as of June 30, 2004 and 2003. The Company has not experienced any
material losses related to accounts receivable from individual customers. The
Company generally does not require c ollateral or other security as a condition
of sale rather relying on credit approval, balance limitation and monitoring
procedures to control credit risk of trade account financial instruments.
Management believes that allowances for doubtful accounts, which are established
based upon review of specific account balances and historical experience, are
adequate.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -13.5pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Revenues
from the Company&#8217;s largest customers, as a percentage of total revenues, were as
follows:</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -13.5pt"
align=left>&nbsp;</DIV>
<DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="57%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%"
    colSpan=2>
      <P><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;<B>2004</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="2%"><P align=center>&nbsp;</P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%"
    colSpan=2>
      <P><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;<B>2003</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="2%"><P align=center>&nbsp;</P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%"
    colSpan=2>
      <P><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;<B>2002</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="57%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left></DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left>Customer A </DIV></FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
      width="11%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"></DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt">24</DIV></FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"></DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt">%</DIV></FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
      width="11%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"></DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt">17</DIV></FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"></DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt">%</DIV></FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
      width="11%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"></DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt">18</DIV></FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"></DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt">%</DIV></FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Customer
      B </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">22</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Customer
      C </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">44</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Customer
      D</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">23</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">All
      Others</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">50</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">32</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">59</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white solid" vAlign=bottom align=left
      width="57%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white thin solid" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">100</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white solid" vAlign=bottom align=left
      width="2%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">%</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">100</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white solid" vAlign=bottom align=left
      width="2%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">%</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">100</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white solid" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">%</FONT></DIV></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">No other
customer accounted for more than 10 % of the Company&#8217;s revenues in fiscal years
2004, 2003 and 2002.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -30pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>(h)&nbsp;&nbsp;&nbsp;&nbsp;
Loss per Share</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Company calculates earnings per share according to SFAS No. 128, <I>Earnings per
Share</I>. Basic loss per share is computed by dividing net loss by the weighted
average number of shares of common stock outstanding during the period. For each
of the three years in the period ended June 30, 2004, the effect of stock
options and warrants was antidilutive; therefore, they were not included in the
computation of diluted loss per share. The number of options and warrants that
were excluded from the computation, as their effect would be antidilutive, were
218,765, 202,817, and 201,533 during fiscal 2004, 2003, and 2002,
respectively.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -30pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Stock-Based Compensation</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
company accounts for its stock-based compensation using the intrinsic value
method provided for under Accounting Principles Board Opinion No. 25,
<I>Accounting for Stock Issued to Employees</I> and related
interpretations<I>.</I> Under APB No. 25 and related interpretations,
compensation cost is recognized based on the difference, if any, on the date of
grant between the fair value of the Company&#8217;s stock and the amount an employee
must pay to acquire the stock. Statement of Financial Accounting Standards
("SFAS") No. 123, <I>Accounting for Stock-Based Compensation</I>, establishes a
fair-value-based method of accounting for stock-based compensation plans. The
Company has adopted the disclosure-only alternative under SFAS No. 123, which
requires the disclosure of the pro forma effects on net loss and net loss per
share as if the fair value accounting prescribed by SFAS No. 123 had been
adopted.</FONT></DIV>
<DIV><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">26</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><B></B>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><B>PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES</B></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>Notes to Consolidated Financial Statements </DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">No
stock-based employee compensation cost is reflected in net loss, as all options
granted had an exercise price equal to the market value of the underlying common
stock on the date of grant. The following table illustrates the effect on net
loss and net loss per share as if the Company had applied the fair value
recognition provisions of SFAS No. 123 to stock-based employee
compensation:</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="57%"></TD>
    <TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="41%"
    colSpan=9>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"><B><I>Year
      Ended</I></B></FONT></DIV></TD></TR>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%"
    colSpan=2>
      <P align=center>&nbsp;<FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"><B>2004</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="2%"><P align=center>&nbsp;</P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%"
    colSpan=2>
      <P align=center>&nbsp;<FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"><B>2003</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="2%"><P align=center>&nbsp;</P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%"
    colSpan=2>
      <P align=center>&nbsp;<FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"><B>2002</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Net
      loss, as reported</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(3,684,076</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(2,927,762</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(9,973,442</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white solid" vAlign=bottom align=left
      width="57%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 12pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Add:
      Total stock-based employee compensation expense determined under fair
      value based method for all awards</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(
      61,216</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(
      82,304</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(98,474</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white solid" vAlign=bottom align=left
      width="57%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Pro
      forma net loss</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&nbsp;(3,745,292</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white solid" align=left width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(3,010,066</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white solid" vAlign=bottom align=left
      width="2%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(10,071,916</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white solid" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Net
      loss per share:</FONT></DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">As
      reported - basic and diluted</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&nbsp;(2.10</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(1.67</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(5.69</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 6pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Pro
      forma - basic and diluted</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(2.14</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(1.72</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(5.75</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -30pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>(j)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Foreign Currency Translation</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Company translates certain accounts and financial statements of its foreign
subsidiary in accordance with SFAS No.&nbsp;52, <I>Foreign Currency Translation.
</I>The functional currency of the Company&#8217;s foreign subsidiary is the United
States dollar. Transaction gains or losses are reflected in the accompanying
consolidated statements of operations and have not been
significant.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -30pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>(k)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Patents</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Patents
are carried at cost, less accumulated amortization of approximately $334,000 and
$290,000 at June 30, 2004 and 2003, respectively. Such costs are amortized using
the straight-line method over the shorter of their legal or estimated useful
lives, generally five to ten years. Amortization expense was $43,604, $37,046,
and $41,375 for the years ended June 30, 2004, 2003, and 2002, respectively.
Amortization expense is expected to be approximately $45,000, $43,000, $36,000,
$25,000 and $18,000, respectively for the years ending June 30, 2005 through
June 30, 2009.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -30pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>(l)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Financial Instruments</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">SFAS No.
107, <I>Disclosure About Fair Value of Financial Instruments</I>, requires
disclosures about the fair value of financial instruments. Financial instruments
consist principally of cash equivalents, accounts receivable, accounts payable,
and accrued expenses. The estimated fair value of these financial instruments
approximates their carrying value due to the short-term nature of these
financial instruments.</FONT></DIV>
<DIV><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">27</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><B>PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES</B></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>Notes to Consolidated Financial Statements </DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -30pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>(m)&nbsp;&nbsp;&nbsp;&nbsp;
Long-Lived Assets</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Company accounts for long-lived assets in accordance with SFAS No. 144,
<I>Accounting for the Impairment or Disposal of Long-Lived Assets.</I> 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. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of
an asset to future net cash flows expected to be generated by the asset. 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. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -30pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>(n)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Warranty Costs</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Company does not incur future performance obligations in the normal course of
business other than providing a standard one-year warranty on materials and
workmanship to its customers. The Company provides for estimated warranty costs
at the time product revenue is recognized. Warranty costs for the years ended
June 30, 2004, 2003, and 2002 have not been material to the consolidated
financial statements. Warranty costs were $15,615, $17,330, and $9,317 for the
years ended June 30, 2004, 2003, and 2002, respectively and have been included
as a component of cost of goods sold in the accompanying consolidated statements
of operations. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -30pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>(o)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Research and Development</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Research
and development expenses are charged to operations as incurred.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -30pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>(p)&nbsp;&nbsp;&nbsp;&nbsp;
Comprehensive Income</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">SFAS
No.&nbsp;130 requires disclosure of all components of comprehensive income on an
annual and interim basis. Comprehensive income is defined as the change in
equity of a business enterprise during a period from transactions and other
events and circumstances from nonowners sources. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Company&#8217;s comprehensive loss for the years ended June&nbsp;30, 2004, 2003 and
2002 was equal to its net loss for the same periods.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>(q)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Income Taxes</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Income
taxes are accounted for under the asset and liability method. Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
assessing the likelihood of utilization of existing deferred tax assets,
management has considered historical results of operations and the current
operating environment. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">28</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: -30pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B></B></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>PRECISION
OPTICS CORPORATION, INC. AND SUBSIDIARIES</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notes to
Consolidated Financial Statements </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -30pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>(r)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Segment Reporting</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;&nbsp;&nbsp;
SFAS No. 131, <I>Disclosures About Segments of an Enterprise and Related
Information,</I> establishes standards for reporting information regarding
operating segments in annual financial statements and requires selected
information for those segments to be presented in interim financial reports
issued to stockholders. SFAS No. 131 also establishes standards for related
disclosures about products and services and geographic areas. Operating segments
are identified as components of an enterprise about which separate discrete
financial information is available for evaluation by the chief operating
decision maker, or decision making group, in making decisions about how to
allocate resources and assess performance. The Company&#8217;s chief decision-maker,
as defined under SFAS No. 131, is the Chief Exec utive Officer. To date, the
Company has viewed its operations and manages its business as principally one
segment. For all periods presented, over 90% of the Company&#8217;s sales have been to
customers in the United States.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -30pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>(s)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Use of Estimates</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -18pt"
align=justify><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
preparation of financial statements in conformity with accounting standards
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -18pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>(2)
COMMITMENTS</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -30pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Related Party Transactions</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Company leases one of its facilities from a corporation owned by an
officer-director-shareholder of the Company. The lease terminated in December
1999 and required lease payments of $9,000 per month. The Company is currently a
tenant at will paying rent of $9,000 a month. Total rent expense for related
parties included in the accompanying consolidated statements of operations
amounted to $108,000 in each of fiscal years 2004, 2003, and 2002.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Company paid or accrued fees to a director of approximately $24,000 per year for
services performed during fiscal 2004, 2003 and 2002. Another director is a
former partner in a law firm that has performed legal services for the Company
during fiscal 2004, 2003 and 2002 of approximately $170,000, $144,000, and
$117,0000, respectively. Another former director is the owner of a company that
provided approximately $1,650, $1,700, and $19,000 in software and consulting
services to the Company during fiscal 2004, 2003 and 2002,
respectively.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -30pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Operating Lease Commitments</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Company has entered into operating leases for its office space and equipment
that expire at various dates through fiscal year 2005. Total future minimum
rental payments under all non-cancelable operating leases are approximately
$29,600.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Rent
expense on operating leases, excluding the related party rent described above,
was approximately $55,600, $51,500, and $70,000 for the years ended June 30,
2004, 2003 and 2002, respectively. </FONT></DIV>
<DIV><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">29</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><B>PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES</B></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>Notes to Consolidated Financial Statements </DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>(3)&nbsp;
STOCKHOLDER'S EQUITY</B></FONT></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B></B></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Reverse Stock Split</B><U> </U></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">All
shares and per share data in the accompanying consolidated financial statements
reflect the effects of the 1-for-6 Reverse Stock Split that became effective on
January 29, 2003. In addition, capital stock has been decreased by $87,518, with
a corresponding increase to paid-in capital to reflect the adjusted number of
shares of $.01 par value common stock outstanding as a result of the 1-for-6
Reverse Stock Split. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -30pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Warrants</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of June 30, 2004, the Company had 77,644 fully-exercisable warrants to
acquire common stock outstanding at a weighted average exercise price of
$160.38. The<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;warrants are immediately
exercisable and expire in March 2005.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -30pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Stock Options</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -30pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</B>During fiscal 1989, the stockholders approved a stock option plan (the "1989
Plan") for key employees. The 1989 Plan, as amended, authorizes the grant of
options<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;of up to 185,000 shares of the
Company&#8217;s common stock at an exercise price of not less than 100% of the fair
market value per share at the date of grant.
Options<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;granted vest and are exercisable
for periods determined by the Board of Directors, not to exceed 10&nbsp;years
from the date of grant.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During fiscal 1998, the stockholders approved an incentive plan (the "1997
Incentive Plan"), which provides eligible participants (certain employees,
directors,<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;consultants, etc.) the
opportunity to receive a broad variety of equity based and cash awards. Options
granted vest and are exercisable for periods determined by the
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Board of Directors, not to exceed 10
years from the date of grant. A total of 300,000 shares of common stock have
been reserved for issuance under the 1997
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Incentive Plan, as amended and restated
in fiscal year 2004. Upon the adoption of the 1997 Incentive Plan, no new awards
will be granted under the 1989 Plan. At<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
June 30, 2004, 183,153 shares of common stock were available for future grants
under the 1997 Incentive Plan. </FONT><BR></DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">30</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"
size=3></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>PRECISION
OPTICS CORPORATION, INC. AND SUBSIDIARIES</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>Note<FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">s
to Consolidated Financial Statements </FONT><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">The
following is a summary of transactions in the plans for the three years ended
June 30, 2004:</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="57%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 12pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left>&nbsp;</DIV></TD>
    <TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%"
    colSpan=2>&nbsp;
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 12pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"><B>Number
      of Shares</B></FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="2%"><P align=center>&nbsp;</P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%"
    colSpan=2>
      <P align=center>&nbsp;<FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"><B>Option
      Price <BR>per Share</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="2%"><P align=center>&nbsp;</P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%"
    colSpan=2>
      <P align=center>&nbsp;<FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"><B>Weighted
      Average Exercise Price</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 6pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left></DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Options
      outstanding, June 30, 2001</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">118,669</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">6.00-75.00</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">16.38</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 6pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Granted</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">30,084</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">4.02-7.14</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">4.68</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 6pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Canceled</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(33,984</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">6.00-30.00</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">29.58</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 6pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left></DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Options
      outstanding, June 30, 2002</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">114,769</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">4.02-75.00</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">13.98</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 21pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Granted</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">3,336</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1.74</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1.74</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 21pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Canceled</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(2,003</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">4.02-23.064</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">9.54</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 6pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Options
      outstanding, June 30, 2003</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">116,102</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1.74-75.00</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">13.68</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 6pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&nbsp;&nbsp;&nbsp;
      Granted</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">18,336</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1.97</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1.97</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white solid" vAlign=bottom align=left
      width="57%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 6pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&nbsp;&nbsp;&nbsp;
      Canceled</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(2,485</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">4.20-75.00</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">27.70</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white solid" vAlign=bottom align=left
      width="57%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 6pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Options
      outstanding, June 30, 2004</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">131,953</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white solid" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1.74-75.00</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white solid" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">11.79
      </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white solid" vAlign=bottom align=left
      width="57%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 6pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Options
      exercisable, June 30, 2004</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">114,807</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white solid" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1.74-75.00</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white solid" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">13.11
      </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white solid" vAlign=bottom align=left
      width="57%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 6pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Options
      exercisable, June 30, 2003</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">103,897</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white solid" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1.74-75.00</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white solid" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">14.34</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white solid" vAlign=bottom align=left
      width="57%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 6pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Options
      exercisable, June 30, 2002</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">92,742</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white solid" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">4.02-75.00</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white solid" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">15.18</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR></TABLE></DIV>
<P><BR></P>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">31</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV><BR>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>PRECISION
OPTICS CORPORATION, INC. AND SUBSIDIARIES</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -30pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -30pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Notes
to Consolidated Financial Statements</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">The
following table summarizes information about stock options outstanding and
exercisable at June 30, 2004: </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV align=left>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR>
    <TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=middle
    width="66%" colSpan=10><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><B>Options
      Outstanding</B></FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=right
    width="31%" colSpan=4>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><B>Options
      Exercisable</B></FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #000000 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=middle
    width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center></DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left>&nbsp;</DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Range
      of Exercise Prices</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: medium none" width="2%"></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%"></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center></DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center></DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Options
      Outstanding</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%"></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%"></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Weighted
      Average Remaining Contractual Life</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%"></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%"></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
width="14%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center></DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center></DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Weighted
      </FONT></DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center></DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Average
      Exercise Price</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%"></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center></DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center></DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Options
      Exercisable</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%"></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%"></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
width="14%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center></DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center></DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Weighted
      Average Exercise Price</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%"></TD></TR>
  <TR>
    <TD vAlign=bottom align=middle width="15%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%">&nbsp;</TD>
    <TD vAlign=bottom align=right width="15%">&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%">&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%">&nbsp;</TD>
    <TD vAlign=bottom align=right width="15%">&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%">&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%">&nbsp;</TD>
    <TD vAlign=bottom align=right width="14%">&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%">&nbsp;</TD>
    <TD vAlign=bottom align=right width="15%">&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%">&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%">&nbsp;</TD>
    <TD vAlign=bottom align=right width="14%">&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=middle width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$1.74-$4.56</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">45,096</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">8.30
      years</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"></FONT>&nbsp;</DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="14%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$3.13</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">29,033</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"></FONT>&nbsp;</DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="14%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$3.41</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=middle width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$6.00
      - $8.25</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">31,006</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">2.25
      years</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"></FONT>&nbsp;</DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="14%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$7.84</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">29,923</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"></FONT>&nbsp;</DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="14%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$7.87</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=middle width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$9.38
      - $13.13</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">18,504</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">2.85
      years</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"></FONT>&nbsp;</DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="14%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$10.93</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">18,504</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"></FONT>&nbsp;</DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="14%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$10.93</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=middle width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$16.50</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1,042</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">3.12
      years</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"></FONT>&nbsp;</DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="14%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$16.50</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1,042</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"></FONT>&nbsp;</DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="14%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$16.50</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
width="1%"></TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=middle width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$23.064
      - $33.00</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">34,971</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">3.95
      years</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"></FONT>&nbsp;</DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="14%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$24.35</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">34,971</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"></FONT>&nbsp;</DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="14%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$24.35</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white solid" vAlign=bottom align=middle
    width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$75.00</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1,334</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=right
    width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">6.17
      years</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"></FONT>&nbsp;</DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=right
    width="14%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$75.00</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1,334</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"></FONT>&nbsp;</DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=right
    width="14%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$75.00</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=middle
    width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$1.74
      - $75.00</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">131,953</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
      width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=right
    width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">4.90
      years</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"></FONT>&nbsp;</DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=right
    width="14%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$11.79</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
      width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="15%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">114,807</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
      width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"></FONT>&nbsp;</DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=right
    width="14%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$13.11</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">In
addition, the Company has granted options outside the plans, primarily to
directors and consultants at 100% of the fair market value per share at the date
of grant. The weighted average remaining contractual life of the options outside
the plans is .66 years as of June 30, 2004. The following is a summary of all
transactions outside the plans: </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="57%"></TD>
    <TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%"
    colSpan=2>&nbsp;
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 6pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"><B>Number
      of Shares</B></FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="2%"><P align=center>&nbsp;</P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%"
    colSpan=2>
      <P align=center>&nbsp;<FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"><B>Option
      Price <BR>per Share</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="2%"><P align=center>&nbsp;</P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%"
    colSpan=2>
      <P align=center>&nbsp;<FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"><B>Weighted
      Average Exercise Price</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Options
      outstanding and exercisable, June 30, 2002, 2003, and 2004</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">9,168</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
      width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">7.80-8.25</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
      width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">8.08</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR></TABLE></DIV>
<P>&nbsp;</P>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">32</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<P><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>PRECISION
OPTICS CORPORATION, INC. AND SUBSIDIARIES</B></FONT></P>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: -30pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>Notes to Consolidated Financial Statements</FONT></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">The
Company has computed the pro forma disclosures required under SFAS
No.&nbsp;123<I> </I>for fiscal 2004, 2003 and 2002 using the Black-Scholes
option pricing model prescribed by SFAS No.&nbsp;123 (See Note
1(i)).</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 30pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">The
assumptions used for each of the three years in the period ended June 30, 2004
are as follows:</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="57%"></TD>
    <TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="41%"
    colSpan=9>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"><B><I>Year
      Ended</I></B></FONT></DIV></TD></TR>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%"
    colSpan=2>
      <P>&nbsp;<FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"><B>2004</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="2%"><P align=center>&nbsp;</P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%"
    colSpan=2>
      <P>&nbsp;<FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"><B>2003</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="2%"><P align=center>&nbsp;</P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right width="12%"
    colSpan=2>
      <P>&nbsp;<FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"><B>2002</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 12pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Risk-free
      interest rates</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">3.85</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">%</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">2.36</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">%</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">4.10</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">%</FONT></DIV></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 12pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Expected
      dividend yield</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 12pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Expected
      lives</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">7
      years</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">7
      years</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">7
      years</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 12pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Expected
      volatility</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">120</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">%</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">131</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">%</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">279</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">%</FONT></DIV></TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 12pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Weighted
      average fair value of&nbsp;grants</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"></FONT>&nbsp;</DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT>1.77</FONT></DIV></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"></FONT>&nbsp;</DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT>1.61</FONT></DIV></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"></FONT>&nbsp;</DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT>4.68</FONT></DIV></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: -30pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><B>(4)</B></FONT><FONT
id=TAB2
style="COLOR: black; LETTER-SPACING: 57.35pt">&nbsp;&nbsp;&nbsp;</FONT></DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><FONT
style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(4)&nbsp;INCOME
TAXES</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
provision for income taxes in the accompanying consolidated statements of
operations consists of the minimum statutory state income tax liability of $912
for each of the three years ended June 30, 2004.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">A
reconciliation of the federal statutory rate to the Company&#8217;s effective tax rate
for the three years ended June 30, 2004 is as follows:</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%"
    colSpan=2>
      <P align=center>&nbsp;<FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"><B>2004</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="2%"><P align=center>&nbsp;</P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%"
    colSpan=2>
      <P align=center>&nbsp;<FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"><B>2003</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="2%"><P align=center>&nbsp;</P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%"
    colSpan=2>
      <P align=center>&nbsp;<FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"><B>2002</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 12pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Income
      tax benefit at federal statutory&nbsp;rate</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(34.0</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)%</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(34.0</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)%</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(34.0</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)%</FONT></DIV></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Increase
      (decrease) in tax resulting from&#8211;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&nbsp;&nbsp;
      State taxes, net of federal benefit</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(6.0</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(6.0</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(6.0</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&nbsp;&nbsp;
      Tax credits</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(1.6</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(3.9</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(0.7</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&nbsp;&nbsp;
      Change in valuation allowance </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">30.6</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">42.0</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">40.0
      </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&nbsp;&nbsp;
      Expiration of tax credits</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">7.3</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&nbsp;&nbsp;
      Other</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">3.7
      </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1.9
      </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">0.7</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="57%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
    width="57%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Effective
      tax rate</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">0.0</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">%</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">0.0</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">%</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">0.0</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">%</FONT></DIV></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">The
components of deferred tax assets and liabilities at June 30, 2004 and 2003 are
approximately as follows:</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="71%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" width="2%"></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%"
    colSpan=2>
      <P align=center>&nbsp;<FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"><B>2004</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="2%"><P align=center>&nbsp;</P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left width="12%"
    colSpan=2>
      <P align=center>&nbsp;<FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"><B>2003</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="1%"><P align=center>&nbsp;</P></TD></TR>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="71%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="71%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Deferred
      tax assets:</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="71%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 12pt; TEXT-INDENT: -12pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&nbsp;&nbsp;
      Net operating loss carryforwards </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">8,745,000</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">7,638,000</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="71%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&nbsp;&nbsp;
      Tax credit carryforwards</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">497,000</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">709,000</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white solid" vAlign=bottom align=left
      width="71%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&nbsp;&nbsp;
      Reserves and accruals not yet deducted for tax purposes</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">3,849,000</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">3,551,000</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="71%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Total
      deferred tax assets</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">13,091,000
      </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">11,898,000</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white solid" vAlign=bottom align=left
      width="71%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Valuation
      allowance</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(11,943,000</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(10,818,000</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="71%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Subtotal</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1,148,000</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">1,080,000</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="71%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Deferred
      tax liabilities:</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="71%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&nbsp;&nbsp;
      Accumulated depreciation</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(1,148,000</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="2%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">(1,080,000</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">)</FONT></DIV></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="71%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
    width="11%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
    width="71%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">Net
      deferred taxes</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
      width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
    width="11%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
      width="1%">&nbsp;</TD></TR></TABLE></DIV>
<DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">33</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>PRECISION
OPTICS CORPORATION, INC. AND SUBSIDIARIES</B></FONT></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notes to
Consolidated Financial Statements </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Company has provided a valuation allowance to reduce the net deferred tax asset
to an amount the Company believes is "more likely than not" to be realized. The
valuation allowance increased in fiscal 2004 by approximately $1,125,000.
Approximately $2,241,000 of the valuation allowance at June&nbsp;30, 2004
related to the exercise of stock options will be allocated to stockholders&#8217;
equity when recognized. As of June 30, 2004, the Company has net operating loss
carryforwards for U.S. federal and state income taxes of approximately
$22,208,000 and $19,908,000, respectively. The U.S. federal net operating loss
carryforwards expire approximately as follows: $697,000 in 2013, $1,511,000 in
2019, $7,154,000 in 2020, $5,554,000 in 2022, $4,054,000 in 2023 and $3,238,000
in 2024. The state net operating loss carryforwards expire approximately as
follows: $7,121,000 in 2005, $5,520,000 in 2007, $4,029,000 in 2008 and
$3,238,000 in 2009. The tax credit carryforwards expire in 2005 through 2024.
Pursuant to the Tax Reform Act of 1986, the utilization of net operating loss
carryforwards for tax purposes may be subject to an annual limitation if a
cumulative change of ownership of more than 50% occurs over a three-year period.
As a result of the Company&#8217;s stock offerings in fiscal years 1998, 2000, and
2005 (see Note 8), such a change in ownership may have occurred. In the event
that the Company has had a change in ownership, as defined, the utilization of
substantially all of the Company&#8217;s net operating loss carryforwards will be
significantly restricted.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>(5)&nbsp;PROVISION
FOR ASSET IMPAIRMENT AND RESTRUCTURING</B><U> </U></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;
<BR></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">A&nbsp;&nbsp;&nbsp;
Asset Impairment:</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In June
2002, certain property and equipment previously invested in the Company&#8217;s
telecommunications product line (whose fair value less cost to sell was
estimated at approximately $848,000 at that time) was reclassified to the
category of "Assets Held for Sale" in the Company&#8217;s consolidated balance sheet.
During fiscal year 2003, the Company received net proceeds of approximately
$553,000 from the sale of a portion of these assets and incurred an impairment
charge of approximately $123,500 based on an updated independent appraisal of
fair market value for the remaining assets. As a cost saving measure, during the
quarter ended December 31, 2003, the Company deployed $21,400 of assets held for
sale and invested $6,300, largely to refurbish certain equipment used to produce
optical thin films for its medical inst rument product line. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
<I>Accounting for the Impairment or Disposal of Long-Lived Assets</I>, the
Company has reclassified the residual unsold portion of these assets (whose fair
value less cost to sell was estimated at $131,150 as of December 31, 2003) to
property and equipment at December 31, 2003 in the accompanying consolidated
balance sheets. The Company has resumed providing depreciation on these assets
beginning in January 2004, using the straight-line method and estimated life of
two years, and is continuing its efforts to sell such assets.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Restructuring:</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
January 2004, the Company reduced its full-time workforce by approximately 15%,
or five employees. As a result of this action, the Company recorded a pretax
charge to earnings in the quarter ended March 31, 2004 of $52,208 for employee
severance benefits that were paid in the quarter ended March 31, 2004.
</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: -18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt; 0: "
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
October 2002, the Company reduced its full-time workforce by approximately 16%,
or six employees. As a result of this action, the Company recorded a pretax
charge to earnings in the quarter ended December 31, 2002 of $53,131 for
employee severance benefits that were paid in the quarter ended December 31,
2002. </FONT></DIV>
<DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">34</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>PRECISION
OPTICS CORPORATION, INC. AND SUBSIDIARIES</B></FONT></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notes to
Consolidated Financial Statements </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
following table sets forth the quarterly impacts and cash payments associated
with the asset impairment and restructuring provisions: </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV>
<TABLE id=10001 cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
    width="43%"></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="55%" colSpan=15>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 6pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>Provision
      For&nbsp;&#8211;&nbsp;</B>&nbsp;</FONT></DIV></TD></TR>
  <TR>
    <TD style="BORDER-BOTTOM: #ffffff solid" vAlign=bottom align=left
    width="43%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="10%" colSpan=2><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;

      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 6pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><B>Property &amp;</B></DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><B>Equipment Writedown</B></DIV></FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">
      <P align=center>&nbsp;</P></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="10%" colSpan=2>
      <P align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;<B>Patent
      Writedown</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">
      <P align=center>&nbsp;</P></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="10%" colSpan=2>
      <P align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;<B>Employee
      Severance</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">
      <P align=center>&nbsp;</P></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="10%" colSpan=2>
      <P align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;<B>Idle
      Lease Space</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%">
      <P align=center>&nbsp;</P></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="10%" colSpan=2>
      <P align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;<B>Total</B></FONT></P></TD>
    <TD style="BORDER-BOTTOM: #ffffff thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="43%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="43%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Provision
      Balance, June 30, 2001</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
      width="43%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left></DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left>Quarter Ended - </DIV></FONT></TD>
    <TD style="BORDER-BOTTOM: white" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="43%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;&nbsp;
      September 30, 2001</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3,444,378</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3,444,378</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="43%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;&nbsp;
      December 31, 2001</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">186,250</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">482,000</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">668,250</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="43%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;&nbsp;
      June 30, 2002</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">541,000</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">57,578</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(266,185</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">332,393</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="43%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Total
      Provision</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3,985,378</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">57,578</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">186,250</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">215,815</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4,445,021</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="43%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Non-cash
      Charges</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(3,985,378</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(57,578</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(4,042,956</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white solid" vAlign=bottom align=left
      width="43%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Cash
      Payments</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(186,250</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(47,844</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(234,094</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
      width="43%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="43%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Provision
      Balance, June 30, 2002</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">167,971</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">167,971</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="43%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
    width="9%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
    width="1%">&nbsp;</TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
      width="43%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left></DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left>Quarter Ended - </DIV></FONT></TD>
    <TD style="BORDER-BOTTOM: white" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="43%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;&nbsp;
      December 31, 2002</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">53,131</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">53,131</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white solid" vAlign=bottom align=left
      width="43%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;&nbsp;
      June 30, 2003</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">123,511</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;
      </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">123,511</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="43%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Total
      Provision</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">123,511</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">53,131
      </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">176,642</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="43%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Non-cash
      Charges</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(123,511</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(123,511</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="43%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Cash
      Payments</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(53,131</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(167,971</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(221,102</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" vAlign=bottom align=left
    width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
      width="43%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="43%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Provision
      Balance, June 30, 2003</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left
      width="43%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: white" vAlign=bottom align=left width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="43%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Quarter
      Ended - </FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white solid" vAlign=bottom align=left
      width="43%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;&nbsp;
      March 31, 2004</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">52,208</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">52,208</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left width="43%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Total
      Provision</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">52,208</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=right width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">52,208</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: white solid" vAlign=bottom align=left
      width="43%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Cash
      Payments</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(52,208</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=left
    width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black thin solid" vAlign=bottom align=right
    width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(52,208</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: white thin solid" vAlign=bottom align=left
    width="1%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</FONT></DIV></TD></TR>
  <TR bgColor=#ffffff>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
      width="43%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=right
      width="9%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #ffffff" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#cbdbd1>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
    width="43%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Provision
      Balance, June 30, 2004</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 thin solid" width="2%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=left
      width="1%"><DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: black double" vAlign=bottom align=right
width="9%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: #cbdbd1 solid" vAlign=bottom align=left
      width="1%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: -18pt; TEXT-INDENT: 66pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt; 0: "
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt; 0: "
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>(6)</B>
<B>PROVISION FOR INVENTORY WRITE-DOWN</B> </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt; 0: "
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt; 0: "
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Company determined that certain inventories of telecommunications and medical
products would not be sold within the Company&#8217;s business cycle or the products&#8217;
life cycle. Consequently, the Company recorded, in cost of goods sold, a
provision for excess and obsolete inventory of approximately $540,000 in fiscal
year 2002, and approximately $500,000 in fiscal year 2004.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt; 0: "
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt; 0: "
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><B>(7)</B>
<B>PROFIT SHARING PLAN</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt; 0: "
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt; 0: "
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Company has a defined contribution 401K profit sharing plan. Employer profit
sharing and matching contributions to the plan are discretionary. No employer
profit sharing contributions were made to the plan in fiscal years 2004, 2003,
or 2002. Employer matching contributions to the plan amounted to $29,972,
$34,608, and $32,354 for fiscal years 2004, 2003 and 2002,
respectively.</FONT></DIV>
<DIV><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV>
<DIV><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">35</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><B>PRECISION OPTICS CORPORATION, INC. AND
SUBSIDIARIES</B></DIV></FONT>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt; 0: "
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<DIV
style="DISPLAY: block; MARGIN-LEFT: -18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt; 0: "
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>Notes to Consolidated Financial Statements </DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><B>(8) SUBSEQUENT EVENT</B></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>In July 2004, the Company completed a rights offering to stockholders
of record at June 7, 2004 by issuing 5,256,159 shares of common stock at a price
of $1.00 per share. Net cash proceeds to the Company (after offering costs of
$177,176) were $5,078,983.</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>The costs of the rights offering estimated to have been incurred
through June 30, 2004 of $171,885, have been deferred and are included in the
caption "deferred financing costs" in the accompanying consolidated balance
sheets as of June 30, 2004.</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>As of June 30, 2004, the Company&#8217;s stockholders&#8217; equity was
$1,503,972, which was less than the minimum level of stockholders&#8217; equity
required under Nasdaq Marketplace Rules for companies listed on the Nasdaq
SmallCap Market. After receipt of net proceeds of $5,078,983 from the rights
offering in July, the Company believes it has regained compliance with the
stockholders&#8217; equity requirement.</DIV>
<DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">36</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><B>PRECISION OPTICS CORPORATION, INC. AND
SUBSIDIARIES</B></DIV></DIV>
<P><BR></P>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>ITEM 8.&nbsp;&nbsp;&nbsp; <U>CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE</U>: None.</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left> </DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>ITEM 8A. <U>CONTROLS AND PROCEDURES</U>: &nbsp;As of the end of the
period covered by this annual report, the Company&#8217;s Chief Executive Officer and
Principal Financial Officer&nbsp;have conducted an evaluation of the Company&#8217;s
disclosure controls and procedures. Based on their evaluation, the Company&#8217;s
Chief Executive Officer and Principal&nbsp;Financial Officer have concluded that
the Company&#8217;s disclosure controls and procedures are effective to ensure that
information required to be disclosed by the &nbsp;Company in reports that it
files or submits under the Securities Exchange Act of 1934 is (i) recorded,
processed, summarized and reported within the time periods specified in the
applicable Securities and Exchange Commission rules and forms and (ii)
accumulated and communicated to the Company&#8217;s management, including the
Company&#8217;s Chief Executive Officer and the Company&#8217;s Principal Financial Officer,
as appropriate to allow timely decisions regarding required disclosure.</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left> </DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 7.6pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left> </DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There was no change in the Company&#8217;s internal control over financial reporting
during the Company&#8217;s most recently completed fiscal quarter that has
materially&nbsp; affected, or is reasonably likely to materially affect, the
Company&#8217;s internal control over financial reporting.</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left> </DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 7.6pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 7.6pt"
align=center><B>PART III</B></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 7.6pt"
align=center>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>ITEM 9.&nbsp;&nbsp;&nbsp;&nbsp; <U>DIRECTORS, EXECUTIVE OFFICERS, AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT</U>: The
Company will furnish to the Securities and Exchange Commission a definitive
Proxy Statement (the "Proxy Statement") not later than 120 days after the close
of its fiscal year ended June 30, 2004. The information required by this item,
other than with respect to the Company&#8217;s Corporate Code of Ethics and Conduct,
is incorporated herein by reference to the&nbsp; Proxy Statement. </DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT id=TAB2
style="LETTER-SPACING: 6pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;<FONT id=TAB2
style="LETTER-SPACING: 6pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp; A copy of the
Company&#8217;s Corporate Code of Ethics and Conduct applicable to all employees,
officers and directors of the Company is being filed with the
Securities&nbsp;and Exchange Commission as Exhibit 14.1 to this report and can
be obtained free of charge by contacting the Company&#8217;s Clerk, c/o Precision
Optics Corporation, 22 &nbsp;East Broadway, Gardner, Massachusetts 01440.</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 7.6pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 7.6pt"
align=left>ITEM 10.&nbsp;&nbsp; <U>EXECUTIVE COMPENSATION</U>: The information
required by this item is incorporated herein by reference to the Proxy
Statement.</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>ITEM 11.&nbsp;&nbsp; &nbsp;<U>SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT</U>: The information required by this item is
incorporated herein by reference to &nbsp;the Proxy Statement. </DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 7.6pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>ITEM 12.&nbsp;&nbsp;&nbsp; <U>CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS</U>: The information required by this item is incorporated herein
by reference to the Proxy<BR>Statement.</DIV>
<P align=center>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">37</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV><BR><B>PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES</B></DIV>
<DIV>&nbsp;</DIV>
<DIV>ITEM 13. <U>EXHIBITS AND REPORTS ON FORM 8-K:</U> </DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: -108pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 7.6pt"
align=left>&nbsp;</DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 54pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)&nbsp;</FONT></TD>
    <TD style="WIDTH: 54pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><U>Exhibits.</U>&nbsp;</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      exhibits listed below are filed with or incorporated by reference in this
      report.&nbsp;</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 54pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="WIDTH: 54pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 54pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="WIDTH: 54pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.1</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Articles
      of Organization of the Company, as amended and corrected<SUP>1
      </SUP></FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 54pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="WIDTH: 54pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.2</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By-laws
      of Precision Optics Corporation, Inc.<SUP>2</SUP>
</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 54pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="WIDTH: 54pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.1</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Specimen
      common stock certificate<SUP>3&nbsp;</SUP>&nbsp;&nbsp;&nbsp;
</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 54pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="WIDTH: 54pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.2</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Registration
      Rights Agreement dated as of March&nbsp;17, 2000 by and among the Company
      and the Initial Investors as defined
therein<SUP>4</SUP></FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 54pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="WIDTH: 54pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.3</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Registration
      Rights Agreement dated as of June 30, 1998 by and among the Company,
      Special Situations Private Equity Fund, L.P. and Special Situations
      Technology Fund, L.P.<SUP>5</SUP></FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 54pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="WIDTH: 54pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.4</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Registration
      Rights Agreement dated as of August 5, 1999 by and among the Company,
      Special Situations Cayman Funds, L.P., Special Situations Fund III, L.P.,
      Special Situations Private Equity Fund, L.P. and Special Situations
      Technology Fund, L.P.<SUP> 6</SUP></FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 54pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="WIDTH: 54pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.5</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
      of Stock Purchase Warrant dated March&nbsp;17, 2000 issued to each
      investor in March&nbsp;17, 2000 private placement
      transaction<SUP>4</SUP></FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 54pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="WIDTH: 54pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.6</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Warrant
      No. 1 dated March&nbsp;17, 2000 issued to First Security Van
      Kasper<SUP>4</SUP></FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 54pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="WIDTH: 54pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.7</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Warrant
      No. 2 dated March&nbsp;17, 2000 issued to First Security Van
      Kasper<SUP>4</SUP></FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 54pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="WIDTH: 54pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.1</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Precision
      Optics Corporation, Inc. 1989 Stock Option Plan amended to
      date<SUP>7</SUP></FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 54pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="WIDTH: 54pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.2</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Three
      separate life insurance policies on the life of Richard E.
      Forkey.<SUP>3</SUP></FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 54pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="WIDTH: 54pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.3</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Master
      Lease Finance Agreement dated November 3, 1993 between the Company and
      BancBoston Leasing<SUP>7</SUP></FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 54pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="WIDTH: 54pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.4</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Lease
      dated March 1, 1999, between the Company and Philip A. Wood, as executor
      of the Estate of Alma L. Wood and as devisee under the Will of Alma L.
      Wood; Martha A. Mount, devisee under the Will of Alma L. Wood; and Nancy
      E. Popinchalk, devisee under the Will of Alma L. Wood for 21 Pleasant
      Street, Gardner, Massachusetts<SUP>6</SUP></FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 54pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="WIDTH: 54pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.5</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Amended
      and Restated Precision Optics Corporation, Inc. 1997 Incentive
      Plan.<SUP>9</SUP></FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 54pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="WIDTH: 54pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.6</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Securities
      Purchase Agreement dated as of March&nbsp;13, 2000 by and among the
      Company and the Purchasers as defined therein (excluding exhibits)<SUP> 4
      </SUP></FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 54pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="WIDTH: 54pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14.1
      </FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Corporate
      Code of Ethics and Conduct </FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 54pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="WIDTH: 54pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">21</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Subsidiaries
      of Precision Optics Corporation, Inc.<SUP>8</SUP></FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 54pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="WIDTH: 54pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">23</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Consent
      of KPMG LLP.</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 54pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="WIDTH: 54pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">31.1</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Certification
      of Chief Executive Officer required by Rule
  13a-14(a)/15d-14(a)</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 54pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="WIDTH: 54pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">31.2</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Certification
      of Chief Financial Officer required by Rule
  13a-14(a)/15d-14(a)</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 54pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="WIDTH: 54pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">32.1</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Certification
      of Chief Executive Officer and Chief Financial Officer required by Rule
      13a-14(b) and 18 U.S.C. 1350.</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 54pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD style="WIDTH: 54pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">99.1</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Important
      Factors Regarding Forward-Looking Statements.</FONT></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 7.6pt"
align=justify>&nbsp;&nbsp;&nbsp; </DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 7.6pt"
align=left><SUP>1</SUP> Incorporated herein by reference to the Company&#8217;s
Quarterly Report for the quarter ended December 31, 2002 on Form 10-QSB (No.
001-10647).</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 7.6pt"
align=left><SUP>2</SUP> Incorporated herein by reference to the Company&#8217;s 1991
Annual Report on Form 10-KSB (No. 001-10647).</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 7.6pt"
align=justify><SUP>3</SUP> Incorporated herein by reference to the Company&#8217;s
Registration Statement on Form S-18 (No. 33-36710-B).</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 7.6pt"
align=justify><SUP>4</SUP> Incorporated herein by reference to the Company&#8217;s
Registration Statement on Form S-3 (No. 333-35884).</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 7.6pt"
align=justify><SUP>5</SUP> Incorporated herein by reference to the Company&#8217;s
1998 Annual Report on Form 10-KSB (No. 001-10647).</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 7.6pt"
align=justify><SUP>6</SUP> Incorporated herein by reference to the Company&#8217;s
1999 Annual Report on Form 10-KSB (No. 001-10647).</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 7.6pt"
align=justify><SUP>7 </SUP>Incorporated herein by reference to the Company&#8217;s
1994 Annual Report on Form 10-KSB (No. 001-10647).</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 7.6pt"
align=justify><SUP>8 </SUP>Incorporated herein by reference to the Company&#8217;s
1996 Annual Report on Form 10-KSB (No. 001-10647).</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 7.6pt"
align=justify><SUP>9 </SUP>Incorporated herein by reference to the Company&#8217;s
Quarterly Report on Form 10-QSB for the quarter ended September 30, 2003 (No.
001-10647).<BR></DIV>
<P style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=center>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">38</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV
style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><BR><B>PRECISION
OPTICS CORPORATION, INC. AND SUBSIDIARIES</B></DIV>
<DIV
style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><B></B>&nbsp;</DIV>
<DIV
style="MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">(b)&nbsp;&nbsp;&nbsp;
<U>Reports on Form 8-K</U>.</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 7.6pt"
align=justify><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 48pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 7.6pt"
align=justify>The Company filed four Current Reports on Form 8-K during the
quarter ended June 30, 2004 as follows - On May 12, 2004, under Items 7 and 12,
the Company reported a press release issued May 12, 2004, reporting its
operating results for the quarter and nine months ended March 31, 2004. On May
12, 2004, under Items 5 and 7, the Company reported a press release issued May
12, 2004 announcing the filing of a registration statement on Form S-3 for a
rights offering to stockholders. On May 25, 2004, under Items 5 and 7, the
Company reported a press release issued May 24, 2004 announcing the record date
for its rights offering to stockholders. On June 15, 2004, under Items 5 and 7,
the Company reported a press release issued on June 14, 2004 announcing the
effectiveness of the Company&#8217;s registration statement on Form S-3 in connection
with a rights offering to stockholders.</DIV>
<P align=center>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">39</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<P><B>PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES</B></P>
<P align=center><B>SIGNATURES</B></P>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 7.6pt"
align=justify>In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 7.6pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 7.6pt"
align=justify>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left> </DIV>
<TABLE cellSpacing=0 cellPadding=0 width="100%" align=center bgColor=#ffffff
border=0>
  <TR vAlign=top bgColor=#ffffff>
    <TD width="50%"><FONT size=2>&nbsp;</FONT></TD>
    <TD width="1%"><FONT size=2>&nbsp;</FONT></TD>
    <TD width="49%"><FONT size=2>&nbsp;</FONT></TD></TR>
  <TR vAlign=top bgColor=#ffffff>
    <TD><FONT size=2>&nbsp;</FONT></TD>
    <TD colSpan=2><FONT size=2><STRONG>PRECISION OPTICS CORPORATION,
      INC.</STRONG></FONT></TD></TR>
  <TR vAlign=top bgColor=#ffffff>
    <TD><FONT size=2>&nbsp;<BR>&nbsp;</FONT></TD>
    <TD><FONT size=2>&nbsp;<BR>&nbsp;</FONT></TD>
    <TD><FONT size=2>&nbsp;<BR>&nbsp;</FONT></TD></TR>
  <TR vAlign=top bgColor=#ffffff>
    <TD><FONT size=2>Date:&nbsp;March 18, 2005</FONT></TD>
    <TD><FONT size=2>By:&nbsp;&nbsp;</FONT></TD>
    <TD><FONT size=2>/s/&nbsp;Richard E. Forkey</FONT></TD></TR>
  <TR vAlign=top bgColor=#ffffff>
    <TD colSpan=2><FONT size=1>&nbsp;</FONT></TD>
    <TD align=left>
      <HR align=left width="80%" color=#000000 noShade SIZE=2>
      <FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Richard
      E. Forkey</FONT></TD></TR>
  <TR vAlign=top bgColor=#ffffff>
    <TD colSpan=2><FONT size=2>&nbsp;</FONT></TD>
    <TD><FONT size=2>Chairman of the Board,<BR>Chief Executive Officer,
      President<BR>and Treasurer</FONT></TD></TR></TABLE>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left> </DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 25.6pt"
align=justify><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 25.6pt"
align=justify>In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 25.6pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 25.6pt"
align=justify>&nbsp;</DIV>
<DIV align=center>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left> </DIV>
<DIV>
<TABLE cellSpacing=0 cellPadding=0 width="100%" bgColor=#ffffff border=0>
  <TR bgColor=#ffffff>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:
      <U>/s/ Richard E. Forkey&nbsp;&nbsp; </U></FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:<U>/s/
      Jack P. Dreimiller</U>&nbsp;</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      Richard E. Forkey</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;
      Jack P. Dreimiller</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      President, Treasurer and Director (principal</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;
      Senior Vice President, Finance,</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      executive officer)</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;
      Chief Financial Officer and Clerk </FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;
      (principal financial and accounting officer)</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Date:
      March 18, 2005</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Date:
      March 18, 2005</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:
      <U>/s/ Joel R. Pitlor&nbsp;&nbsp; </U>&nbsp;</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:
      <U>/s/ Edward A. Benjamin</U>&nbsp;</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      Joel R. Pitlor</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;
      Edward A. Benjamin&nbsp;</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      Director</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;
      Director</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Date:
      March 18, 2005</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Date:
      March 18, 2005</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:
      <U>/s/ Robert R. Shannon</U>&nbsp;</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      Robert R. Shannon</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      Director</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD></TR>
  <TR bgColor=#ffffff>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Date:
      March 18, 2005&nbsp;</FONT></TD>
    <TD width="33.33%"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD width="33.33%">&nbsp;</TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left> </DIV></DIV>
<DIV><BR>
<P><BR></P></DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt" face="Times New Roman"></FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 25.6pt"
align=justify><BR></DIV>
<P><BR><BR></P>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV></DIV></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt; 0: "
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt; 0: "
align=left>&nbsp;</DIV></BODY></HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-14.1
<SEQUENCE>2
<FILENAME>v014603_ex14-1.htm
<TEXT>
<HTML><HEAD>
<TITLE>
</TITLE>
</HEAD><BODY id=38 bgColor=#ffffff>
<DIV><BR>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG>EXHIBIT
14.1</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG>Precision
Optics Corporation, Inc.</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG>Corporate
Code of Ethics and Conduct</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25"><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: (normal text), Times New Roman, serif"><STRONG>1.</STRONG></FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG><U>General
Policy</U></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">It
is the policy of Precision Optics Corporation, Inc. ("Precision Optics" or the
"Company") to conduct business in compliance with all applicable laws, rules and
regulations. Further, it is our policy to conduct business with integrity. We
make this commitment to our customers, to our partners, to our stockholders, to
our community, to those government agencies that regulate Precision Optics, and
to ourselves. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Each
Precision Optics employee, officer and director must work to comply with the
policies set forth in this Code of Ethics and Conduct (the "Code"). All
employees, officers and directors should review this Code and related materials,
including the Company&#8217;s Employee Manual dated May 1, 2001 (the "Employee
Manual"), portions of which are referred to in this Code, and make sure that
these policies guide their actions. Because of the complex and changing nature
of legal requirements, each member of Precision Optics must be constantly
vigilant to ensure that their conduct complies with the Code. If any employee,
officer or director becomes aware of an issue of legal compliance which is not
adequately addressed in this Code, you should notify your supervisor or the
Chief Financial Officer.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Precision
Optics takes compliance with laws, regulations, rules and the Code seriously.
Any violation of such will result in disciplinary action. Such action may
include an oral or written warning, disciplinary probation, suspension,
reduction in salary, demotion or dismissal from employment. These disciplinary
actions also may apply to an employee&#8217;s supervisor who directs or approves the
employee&#8217;s improper actions or is aware of those actions, but does not act
appropriately to correct them or fails to exercise appropriate
supervision.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">If
a question arises as to whether any action complies with Precision Optics&#8217;
policies or applicable law, an employee, officer or director should present that
question directly to the Company&#8217;s Chief Financial Officer (the "Compliance
Officer"). The Compliance Officer&#8217;s telephone number is (978) 630-1800 ext. 117.
</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG></STRONG></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Concerns
about violations of any part of this Code made to the telephone number may be
made anonymously.</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG>
</STRONG></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; COLOR: #000000; FONT-FAMILY: Times New Roman, serif">Any
calls, detailed notes and/or emails will be dealt with confidentially. In
raising an issue, you may remain anonymous, although you are encouraged to
identify yourself. Should you choose to identify yourself, your identity will be
kept confidential to the extent feasible or permissible under the law. All
employees, officers and directors of Precision Optics have the commitment of
Precision Optics and of the Audit Committee of Precision Optics&#8217; Board of
Directors that they will be protected from retaliation</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">.</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, serif">
</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; COLOR: #000000; FONT-FAMILY: Times New Roman, serif">However,
Precision Optics reserves the right to discipline anyone who knowingly makes a
false accusation, provides false information to the Company or has acted
improperly.</FONT> <FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #ff0000; FONT-FAMILY: Times New Roman, serif"><SUP><STRONG></STRONG></SUP></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, serif"></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Failure
to report known or suspected wrongdoing of which any member of Precision Optics
has knowledge may, by itself, subject that person to disciplinary
action.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">This
Code generally highlights some of the more important legal principles with which
employees, officers and directors are expected to be familiar. The fact that
this Code does not specifically reference other applicable laws (some of which
may be covered in other Precision Optics policies) does not diminish their
importance or application. </FONT></DIV>
<DIV>&nbsp;</DIV>
<DIV>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">1</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25"><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: (normal text), Times New Roman, serif"><STRONG>2.</STRONG></FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG><U>Compliance
with the Law</U></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Precision
Optics seeks to comply with all applicable government laws, rules and
regulations. We need the cooperation of all employees, officers and directors to
do so and to bring lapses or violations to light. While some regulatory schemes
may not carry criminal penalties, they may control the licenses and
certifications that allow Precision Optics to conduct its business. Precision
Optics&#8217; continued ability to operate depends upon your help for
compliance.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Some
of the regulatory programs which employees may deal with in the course of their
duties include, but are not limited to, the following:</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV>
<TABLE id=list cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 72pt" align=right><FONT
      style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Courier New, monospace">o&nbsp;&nbsp;</FONT></TD>
    <TD><FONT
      style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Labor
      laws,</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=list cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 72pt" align=right><FONT
      style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Courier New, monospace">o&nbsp;&nbsp;</FONT></TD>
    <TD><FONT
      style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Occupational
      safety and health regulation,</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=list cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 72pt" align=right><FONT
      style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Courier New, monospace">o&nbsp;&nbsp;</FONT></TD>
    <TD><FONT
      style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Building,
      safety and fire codes,</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=list cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 72pt" align=right><FONT
      style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Courier New, monospace">o&nbsp;&nbsp;</FONT></TD>
    <TD><FONT
      style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Wage
      and hour laws, and</FONT></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=list cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 72pt" align=right><FONT
      style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Courier New, monospace">o&nbsp;&nbsp;</FONT></TD>
    <TD><FONT
      style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Applicable
      U.S. Food and Drug Administration regulations.</FONT></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 99pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">The
Compliance Officer can provide employees with information on these rules, and
can direct questions or concerns to the proper person.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25"><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: (normal text), Times New Roman, serif"><STRONG>3.</STRONG></FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG><U>Stock</U></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Because
our stock is a publicly-traded security, certain activities of Precision Optics
are subject to certain provisions of the federal securities laws. These laws
govern the dissemination or use of information about the affairs of Precision
Optics or its subsidiaries or affiliates, and other information which might be
of interest to persons considering the purchase or sale of our stock. Violations
of the federal securities laws could subject you and the Company to stiff
criminal and civil penalties. Accordingly, Precision Optics does not sanction
and will not tolerate any conduct that risks a violation of these
laws.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: (normal text), Times New Roman, serif"><STRONG></STRONG></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: (normal text), Times New Roman, serif"><STRONG>a.</STRONG></FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG><U>Disclosure
of Transactions in Company&#8217;s Securities</U></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">The
Securities and Exchange Commission ("SEC") requires continuing disclosure of
transactions in the Company&#8217;s publicly traded securities by the Company, its
directors, officers, major stockholders and other affiliated persons. We are
committed to complying with obligations related to this disclosure.
</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: (normal text), Times New Roman, serif"><STRONG></STRONG></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: (normal text), Times New Roman, serif"><STRONG>b.</STRONG></FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG><U>Insider
Trading</U></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">It
is illegal for any person, either personally or on behalf of others, (i) to buy
or sell securities while in possession of material non-public information, or
(ii) to communicate (to "tip") material non-public information to another person
who trades in the securities on the basis of the information or who in turn
passes the information on to someone who trades. All directors, officers,
employees and temporary insiders, such as accountants and lawyers, must comply
with these "insider trading" restrictions. For more information, please see the
section entitled </FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><EM>"Trades
in Public Securities by Company Personnel"</EM></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">
set forth in the Employee Manual, a copy of which has been previously provided
to you but which may also be obtained upon request to the Compliance
Officer.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV><BR>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">2</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25"><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: (normal text), Times New Roman, serif"><STRONG>4.</STRONG></FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG><U>Confidential
Information</U></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">You
may be entrusted with Precision Optics&#8217; confidential business information. You
are required to safeguard and use such information only for Precision Optics&#8217;
purposes. Confidential information includes all non-public information that
might be of use to competitors or harmful to Precision Optics or its customers,
if disclosed. You are expected to maintain the confidentiality of any and all
such information entrusted to you by Precision Optics or our customers or
partners. Examples of confidential business information include, but are not
limited to: the Company&#8217;s trade secrets, business trends, information on product
development programs, detailed sales and cost figures, new product or marketing
plans, research and development ideas or information, manufacturing processes,
and information about potential acquisitions, divestitures and investments.
Failure to observe this duty of confidentiality may compromise our competitive
advantage over competitors and may additionally result in a violation of
securities, antitrust or employment laws. It may also violate agreements
providing for the protection of such confidential information. You should not
discuss confidential Company information outside the Company, even with your own
family.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">You
may also possess sensitive, privileged information about our customers or
partners. These parties properly expect that this information will be kept
confidential. Precision Optics takes very seriously any violation of a
customer&#8217;s or partner&#8217;s confidentiality and will not tolerate such conduct.
</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">For
more information, please see the section entitled </FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><EM>"Confidentiality
of Company Information" </EM></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">set
forth in the Employee Manual.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25"><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: (normal text), Times New Roman, serif"><STRONG>5.</STRONG></FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG><U>Special
Ethical Obligations For Employees With Public Reporting
Responsibilities</U></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">As
a public company, we are also committed to carrying out all continuing
disclosure obligations in a full, fair, accurate, timely and understandable
manner. Depending on their position with Precision Optics, employees, officers
or directors may be called upon to provide information to assure that the
Company&#8217;s public reports are complete, fair and understandable. Precision Optics
expects all of its personnel to take this responsibility very seriously and to
provide prompt and accurate answers to inquiries related to the Company&#8217;s public
disclosure requirements.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">The
Accounting Department bears a special responsibility for promoting integrity
throughout the organization, with responsibilities to stockholders both inside
and outside of Precision Optics. The Chief Executive Officer, the Chief
Financial Officer and other Accounting Department personnel have a special role
both to adhere to these principles themselves and also to ensure that a culture
exists throughout the company as a whole that ensures the fair and timely
reporting of Precision Optics&#8217; financial results and condition.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV><BR>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">3</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Employees,
officers and directors should promptly report to the Compliance Officer and/or
the Audit Committee any conduct that the individual believes to be a violation
of law or business ethics or of any provision of the Code, including any
transaction or relationship that reasonably could be expected to give rise to
such a conflict. Violations, including failures to report potential violations
by others, will be viewed as a severe disciplinary matter that may result in
personnel action, including termination of employment. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25"><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: (normal text), Times New Roman, serif"><STRONG>6.</STRONG></FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG><U>Continuing
Disclosure Obligations and Accuracy of Business
Records</U></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">In
order to support all our disclosure obligations, it is our policy to record and
report our factual information honestly and accurately. Failure to do so is a
grave offense and will subject an individual to severe discipline by the
Company, as well as possible criminal and civil penalties.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Compliance
with established accounting procedures, Precision Optics&#8217; system of internal
controls, and generally accepted accounting principles is necessary at all
times. In order to achieve such compliance, the Company&#8217;s records, books and
documents must accurately reflect the transactions and provide a full account of
Precision Optics&#8217; assets, liabilities, revenues and expenses. Knowingly entering
inaccurate or fraudulent information into Precision Optics&#8217; accounting system is
unacceptable and may be illegal. Any individual that has knowledge that an entry
or process is false and material are expected to consult the Compliance Officer.
In addition, it is the responsibility of each member of Precision Optics to give
their cooperation to the Company&#8217;s auditors.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Every
individual should also be aware that almost all business records of the Company
may become subject to public disclosure in the course of litigation or
governmental investigation. Records are also often obtained by outside parties
or the media. Employees should therefore attempt to be as clear, concise,
truthful and accurate as possible when recording any information. They must
refrain from making legal conclusions or commenting on legal positions taken by
the Company or others. They must also avoid exaggeration, colorful language, and
derogatory characterizations of people and their motives. Precision Optics will
not tolerate any conduct that creates an inaccurate impression of Precision
Optics&#8217; business operations.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25"><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: (normal text), Times New Roman, serif"><STRONG>7.</STRONG></FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG><U>Protection
and Proper Use of Company Assets</U></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Employees,
officers and directors should protect the Company&#8217;s assets and ensure their
efficient use. Theft, carelessness and waste have a direct impact on the
Company&#8217;s profitability. All Company assets should be used for legitimate
business purposes. Individual supervisors are responsible for ensuring Company
resources are used productively or to enhance employees&#8217; skills and job
performance.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Everyone
who works with the Company&#8217;s computer-based resources is responsible for their
appropriate use and protection from theft, damage or loss. Employees should take
care to understand the risks and protect and ensure that the security features
of the computer-based resources are not compromised. Information created,
transmitted or accessed on Company networks is Company property and Precision
Optics reserves the right to monitor or restrict access to it. The same level of
care should be taken when using Precision Optics&#8217; e-mail, internet and voice
mail systems as is used in written documents. For example, confidential
information about Precision Optics should not be disclosed on electronic
bulletin boards, in chat rooms or posted on an internet website. For more
information, please see the section entitled </FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><EM>"Use
of Computers" </EM></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">set
forth in the Employee Manual.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV><BR>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">4</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25"><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: (normal text), Times New Roman, serif"><STRONG>8.</STRONG></FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG><U>Corporate
Opportunities</U></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Employees,
officers and directors are prohibited from (a) taking for yourself personally
opportunities that you discover through the use of Company property, information
or position, (b) using Company property, information or position for personal
gain and (c) competing with the Company. An employee, officer or director owes a
duty to the Company to advance its legitimate interests when the opportunity to
do so arises.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25"><FONT
size=3><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: (normal text), Times New Roman, serif"><STRONG><FONT
size=3>9.</FONT></STRONG></FONT><FONT id=TAB2
style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG><U>Fair
Dealing</U></STRONG></FONT></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Employees,
officers and directors should endeavor to deal fairly with the Company&#8217;s
customers, partners, suppliers, competitors and employees. You should not take
unfair advantage of anyone through manipulation, concealment, abuse of
privileged information, misrepresentation of material facts or any other
unfair-dealing practices.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25"><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: (normal text), Times New Roman, serif"><STRONG>10.</STRONG></FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG><U>Conflicts
of Interest</U></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Precision
Optics&#8217; employees, officers and directors should avoid all potential conflicts
of interest or situations that give the appearance of a conflict of interest. A
conflict of interest occurs when the private interest of a Precision Optics
employee or director (or an immediate family or household member or someone with
whom you have an intimate relationship) interferes, in any way -- or even
appears to interfere -- with the duties performed by the Precision Optics
employee or director or with the interests of the Company as a whole. A conflict
situation can arise when an employee, officer or director takes actions or has
interests that may make it difficult to perform his or her work objectively and
effectively. Conflicts of interest also arise when an employee, officer or
director, or a member of his or her family, receives improper personal benefits
as a result of his or her position in the Company. Loans to, or guarantees of
obligations of, such persons are of special concern. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">To
this end, Precision Optics&#8217; employees, officers or directors may not be employed
by, act as a consultant to, or have an independent business relationship with
any of Precision Optics&#8217; customers, competitors or suppliers. Nor may employees,
officers or directors invest in any customer, supplier, or competitor (other
than through mutual funds or through holdings of less than 2</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG>
</STRONG></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">percent
of the outstanding shares of publicly traded securities) unless they first
obtain written permission from the Chief Executive Officer. Employees, officers
or directors may not divulge or use Precision Optics&#8217; confidential information
- -- such as financial data, customer information, and computer programs -- for
their own personal or business purposes.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Any
personal or business activities by an employee, officer or director that may
raise concerns along these lines must be disclosed to and approved in advance by
the Compliance Officer. For more information, please see the section entitled
</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><EM>"Conflict
of Interest" </EM></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">set
forth in the Employee Manual. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">5</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV><STRONG></STRONG><BR><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: (normal text), Times New Roman, serif"><STRONG>11.</STRONG></FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG><U>Gifts,
Meals and Entertainment</U></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: (normal text), Times New Roman, serif"><STRONG></STRONG></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: (normal text), Times New Roman, serif"><STRONG>a.</STRONG></FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG><U>Entertainment
and Gifts</U></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Precision
Optics recognizes that in some instances, gifts and entertainment can provide an
appropriate means of furthering a business relationship. However, no employee,
officer or director should accept or provide gifts of more than $50 in
connection with their business dealings. The offer or receipt of any such gift
over $50 should be reported immediately to the Compliance Officer. Normal
business courtesies involving no more than ordinary amenities (such as lunch,
dinner, a spectator event or a golf game) are permitted, as are token non-cash
gifts of nominal value. The guiding principle and spirit of this code is that no
gift, favor or entertainment, whether a single event or a pattern of behavior,
should be accepted or provided if it will obligate, or appear to obligate, the
recipient. If you are uncertain about the propriety of a gift, you should
contact the Compliance Officer for guidance.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: (normal text), Times New Roman, serif"><STRONG></STRONG></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: (normal text), Times New Roman, serif"><STRONG>b.</STRONG></FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG><U>Relationships
with Government Personnel</U></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Separate
and more stringent gift, meals, and entertainment rules apply to dealings with
government officials. Federal and state anti-kickback laws prohibit Precision
Optics and its representatives from knowingly and willfully offering, paying,
requesting, or receiving any money or other benefit, directly or indirectly, in
return for obtaining or rewarding favorable treatment in connection with the
award of a government contract. Any employee who becomes aware of any such
conduct should immediately report it to the Compliance Officer.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">The
anti-kickback laws must be considered whenever something of value is given or
received by Precision Optics or its representatives or affiliates that is in any
way connected to work performed for the government. There are many transactions
that may violate the anti-kickback rules. As a result, no one acting on behalf
of Precision Optics may offer or accept gifts, loans, rebates, services, or
payment of any kind to or from government suppliers and vendors without first
consulting the Compliance Officer.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: (normal text), Times New Roman, serif"><STRONG></STRONG></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: (normal text), Times New Roman, serif"><STRONG>c.</STRONG></FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG><U>Business
Dealings in Foreign Countries</U></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Federal
law prohibits U.S. companies, and those acting on their behalf, from bribing
foreign officials to obtain or retain business. Foreign officials include
officers and employees of a foreign government or of a foreign governmental
department or agency. Indirect payments including those to agents or third
parties with the knowledge that at least a portion of the payment will be given
to a foreign official for an illegal purpose are prohibited. Precision Optics
will not tolerate any conduct that violates this law.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25"><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: (normal text), Times New Roman, serif"><STRONG>12.</STRONG></FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG><U>Interacting
with the Government</U></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Precision
Optics values its good relations with local, state, federal and foreign
governments. We are committed to being a "good corporate citizen" and are proud
of the contributions we have made to help the communities where we do business.
</FONT></DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">6</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV><BR>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">The
Company&#8217;s policy is to deal honestly and fairly with government representatives
and agents and to comply with valid and reasonable governmental requests and
processes. Be truthful and straightforward in your dealings with governmental
representatives and do not direct or encourage another Precision Optics employee
(or someone else) to provide false or misleading information to any government
agent or representative. Do not direct or encourage anyone to destroy records
relevant to a fact-finding process. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25"><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: (normal text), Times New Roman, serif"><STRONG>13.</STRONG></FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG><U>Employee
Relations</U></STRONG></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG>
</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">The
Company recognizes and understands the importance of balancing work and family
life. Even though an employee&#8217;s non-work-related activities outside of the
Company are considered personal business, employees should always remember that
they are a representative of the Company. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">All
employees, officers and directors should review the Company&#8217;s policies regarding
discrimination, workplace harassment (including sexual harassment), health and
safety and related matters, which are set forth in the Employee
Manual.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25"><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: (normal text), Times New Roman, serif"><STRONG>14.</STRONG></FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG><U>Purchasing</U></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Purchasing
decisions must be made in accordance with applicable Precision Optics policy. In
addition, the prohibitions discussed in Section 11 of this Code, entitled
"Gifts, Meals and Entertainment" apply to purchasing decisions made on behalf of
Precision Optics. Purchasing decisions must in all instances be made free from
any conflicts of interest that could affect the outcome. Precision Optics is
committed to a fair and objective procurement system which results in the
acquisition of quality goods and services for Precision Optics at a fair
price.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25"><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: (normal text), Times New Roman, serif"><STRONG>15.</STRONG></FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG><U>Exports
and Imports</U></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">There
are many U.S. laws governing international trade and commerce which serve to
limit the export of certain products to certain countries. Precision Optics is
committed to complying with those laws. Under no circumstances will Precision
Optics make sales contrary to U.S. export laws. Because these regulations are
complicated and change periodically, employees seeking to make a sale to a
customer in a foreign country must first confirm the legal trade status of that
country. If an employee is uncertain about whether a foreign sale complies with
U.S. export laws, he or she must contact the Compliance Officer for guidance.
Precision Optics&#8217; employees should be aware that there are also many U.S. laws
that govern the import of items into the United States. Among other things,
these laws control what can be imported into the United States, how the articles
should be marked, and the amount of duty to be paid. Precision Optics complies
with all U.S. import laws. If an employee is uncertain about whether a
transaction involving the importation of items into the United States complies
with these laws, he or she must contact the Compliance Officer for
guidance.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25"><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: (normal text), Times New Roman, serif"><STRONG>16.</STRONG></FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG><U>Media/Public
Relations and Governmental Inquiries</U></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">When
Precision Optics provides information to the news media, securities analysts and
stockholders, it has an obligation to do so accurately and completely. In order
to ensure that Precision Optics complies with its obligations, employees
receiving inquiries regarding Precision Optics&#8217; activities, results, plans or
position on public issues should refer the request to the Company&#8217;s Chief
Executive Officer, Chief Financial Officer or the designated corporate
spokesperson. Precision Optics&#8217; employees may not speak publicly for the Company
unless specifically authorized by senior management.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">7</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV><BR>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Although
unlikely, a government representative may seek to interview an employee
regarding Precision Optics&#8217; business activities or an employee&#8217;s work at the
Company. If an employee is contacted by a government agent or representative and
asked to provide information, contact the Chief Financial Officer at (978)
630-1800 ext. 117.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Occasionally,
someone will arrive unexpectedly or a government representative may seek to
inspect Company property. If this happens, an employee should immediately notify
his or her manager or supervisor and contact the Chief Financial Officer at
(978) 630-1800 ext. 117.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25"><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: (normal text), Times New Roman, serif"><STRONG>17.</STRONG></FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG><U>Response
to Investigations or Government Inquiries</U></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Numerous
state and federal agencies have broad legal authority to investigate Precision
Optics and review its records. Precision Optics will comply with subpoenas and
respond to governmental investigations as required by law. The Compliance
Officer is responsible for coordinating Precision Optics&#8217; response to
investigations and the release of any information.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">If
an employee, director or officer receives an investigative demand, subpoena, or
search warrant involving Precision Optics, it should be brought immediately to
the Compliance Officer. No documents should be released or copied without
authorization from the Compliance Officer or Precision Optics&#8217; legal counsel. If
an investigator, agent or government auditor comes to Precision Optics&#8217;
corporate headquarters, the Chief Executive Officer should be contacted
immediately. In the absence of the Chief Executive Officer, contact Precision
Optics&#8217; Compliance Officer. Ask the investigator to wait until the contacted
individual arrives before reviewing any documents or conducting any interviews.
The Compliance Officer, his designee, or Company&#8217;s legal counsel is responsible
for assisting with any interviews. If Precision Optics&#8217; employees are approached
by government investigators and agents while they are away from Precision
Optics&#8217; premises and asked to discuss Company affairs, the employee has the
right to insist on being interviewed during business hours with a supervisor or
counsel present. Alternatively, any employee may choose to be interviewed or not
to be interviewed at all. The Company recognizes the choice of how to proceed in
these circumstances is left entirely to the employee. If an employee chooses to
speak with government personnel, it is essential that the employee be truthful.
Questions may be directed to the Compliance Officer.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Precision
Optics&#8217; employees are not permitted to alter, remove, or destroy documents or
records of Precision Optics except in accordance with regular document retention
and destruction practices.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25"><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: (normal text), Times New Roman, serif"><STRONG>18.</STRONG></FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG><U>Disciplinary
Action</U></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">It
is essential that all employees accept personal responsibility for maintaining
high standards of conduct and job performance, including the observance of the
Code and other Company rules and policies. The Company shall consistently
enforce the Code through appropriate means of discipline. Violations of the Code
shall be promptly reported to the Compliance Officer and the Audit Committee.
The Audit Committee shall determine whether violations of the Code have occurred
and, if so, shall determine the disciplinary measures to be taken against any
employee of the Company who has so violated the Code. Disciplinary measures,
which may be invoked at the discretion of the Audit Committee, include, but are
not limited to, oral or written warnings, disciplinary probation, suspension,
reductions in salary, demotion or termination of employment. The purpose of
disciplinary measures short of termination is corrective, to encourage employees
to improve their conduct or performance so that they may continue their
employment with the Company. These corrective disciplinary measures will not
apply in the event of a serious offense that warrants immediate termination or
in other circumstances when the Audit Committee determines that corrective
measures would be inappropriate. </FONT></DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">8</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV><BR>&nbsp;</DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25"><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; COLOR: #000000; FONT-FAMILY: (normal text), Times New Roman, serif"><STRONG>19.</STRONG></FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; COLOR: #000000; FONT-FAMILY: Arial, sans-serif"><STRONG><U><FONT
face="Times New Roman">Amendments and Waivers</FONT></U></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; COLOR: #000000; FONT-FAMILY: Times New Roman, serif">This
Code applies to all of Precision Optics&#8217; employees, officers and directors.
There shall be no substantive amendment or waiver of any part of the Code
affecting the directors, senior financial officers, or executives officers,
except by a vote of the Board of Directors, which will ascertain whether an
amendment or waiver is appropriate and ensure that the amendment or waiver is
accompanied by appropriate controls designed to protect Precision
Optics.</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman, serif"><SUP>
</SUP></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 12pt; COLOR: #000000; FONT-FAMILY: Times New Roman, serif">In
the event that any substantive amendment is made or any waiver is granted, the
substantive amendment or waiver will be filed with the SEC on a Current Report
on Form 8-K (or such other form as may be prescribed by the SEC), thereby
allowing the Precision Optics stockholders to evaluate the merits of the
particular substantive amendment or waiver.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">9</FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV></DIV></BODY></HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>3
<FILENAME>v014603_ex23.htm
<TEXT>
<HTML><HEAD>
<TITLE>
</TITLE>
</HEAD><BODY id=38 bgColor=#ffffff>
<DIV><BR>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><B>Exhibit
23 </B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=right><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=right><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=right><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=right><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, serif"><B>CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 27pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">We
consent to the incorporation by reference in the registration statements,
numbers 333-35884, 333-87977 and 333-66297 on Form&nbsp;S-3 and numbers
333-89989, 333-94125, 33-72108, 333-97525 and 333-110946 on Form&nbsp;S-8 of
Precision Optics Corporation,&nbsp;Inc. of our report dated August 31, 2004,
with respect to the consolidated balance sheets of Precision Optics
Corporation,&nbsp;Inc. and Subsidiaries, as of June&nbsp;30,&nbsp;2004 and 2003
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the years in the three-year period ended June 30, 2004,
which report appears in the June&nbsp;30, 2004, annual report on
Form&nbsp;10-KSB of Precision Optics Corporation,&nbsp;Inc. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 315pt; TEXT-INDENT: -9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">/s/
KPMG LLP</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">Boston,
Massachusetts </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">September&nbsp;16,
2004</FONT></DIV>
<DIV></DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt" face="Times New Roman"></FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV></DIV></BODY></HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>4
<FILENAME>v014603_ex31-1.htm
<TEXT>
<HTML><HEAD>
<TITLE>
</TITLE>
</HEAD><BODY id=38 bgColor=#ffffff>
<DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><STRONG>PRECISION OPTICS CORPORATION, INC. AND
SUBSIDIARIES</STRONG></DIV><BR>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 25.6pt"
align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG><U>Exhibit
31.1</U></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 7.6pt"
align=justify><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG>Certification
of Chief Executive Officer Required by Rule
13a-14(a)/15d-14(a)</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 25.6pt"
align=center><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 25.6pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG><U>CERTIFICATIONS</U></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">I,
Richard E. Forkey, certify that: </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 18pt">&nbsp;</TD>
    <TD style="WIDTH: 18pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">1.</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">I
      have reviewed this Annual Report on Form 10-KSB of Precision Optics
      Corporation, Inc.; </FONT></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 18pt">&nbsp;</TD>
    <TD style="WIDTH: 18pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">2.</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">Based
      on my knowledge, this report does not contain any untrue statement of a
      material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report; </FONT></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 18pt">&nbsp;</TD>
    <TD style="WIDTH: 18pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">3.</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">Based
      on my knowledge, the financial statements, and other financial information
      included in this report, fairly present in all material respects the
      financial condition, results of operations and cash flows of the small
      business issuer as of, and for, the periods presented in this report;
      </FONT></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 18pt">&nbsp;</TD>
    <TD style="WIDTH: 18pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">4.</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">The
      small business issuer's other certifying officer(s) and I are responsible
      for establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small
      business issuer and have: </FONT></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">(a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the small business issuer, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">(b)
Evaluated the effectiveness of the small business issuer's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">(c)
Disclosed in this report any change in the small business issuer's internal
control over financial reporting that occurred during the small business
issuer's most recent fiscal quarter (the small business issuer's fourth fiscal
quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the small business issuer's internal
control over financial reporting; and </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">
<DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left> </DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 18pt"></TD>
    <TD style="WIDTH: 18pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">5.</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman">The
      small business issuer's other certifying officer(s) and I have disclosed,
      based on our most recent evaluation of internal control over financial
      reporting, to the small business issuer&#8217;s auditors and the audit committee
      of the small business issuer&#8217;s board of directors (or persons performing
      the equivalent functions):</FONT></TD></TR></TABLE>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left> </DIV></DIV></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">(a)
All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to
adversely affect the small business issuer's ability to record, process,
summarize and report financial information; and </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">(b)
Any fraud, whether or not material, that involves management or other employees
who have a significant role in the small business issuer's internal control over
financial reporting. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">
<DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left> </DIV>
<TABLE cellSpacing=0 cellPadding=0 width="100%" align=center bgColor=#ffffff
border=0>
  <TR vAlign=top bgColor=#ffffff>
    <TD><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman">&nbsp;<BR>&nbsp;</FONT></TD>
    <TD><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman">&nbsp;<BR>&nbsp;</FONT></TD>
    <TD><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman">&nbsp;<BR>&nbsp;</FONT></TD></TR>
  <TR vAlign=top bgColor=#ffffff>
    <TD><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman">Date:&nbsp;March
      18, 2005</FONT></TD>
    <TD><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman"></FONT></TD>
    <TD><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman">/s/&nbsp;Richard
      E. Forkey</FONT></TD></TR>
  <TR vAlign=top bgColor=#ffffff>
    <TD colSpan=2><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman">
      <HR align=left width="80%" color=#808080 noShade SIZE=2>
      Richard E. Forkey</FONT></TD></TR>
  <TR vAlign=top bgColor=#ffffff>
    <TD colSpan=2><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></TD>
    <TD><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman">Chief
      Executive Officer</FONT></TD></TR></TABLE>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left> </DIV></DIV></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt" face="Times New Roman"></FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV></DIV></BODY></HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>5
<FILENAME>v014603_ex31-2.htm
<TEXT>
<HTML><HEAD>
<TITLE>
</TITLE>
</HEAD><BODY id=38 bgColor=#ffffff>
<DIV><STRONG>PRECISION OPTICS CORPORATION, INC. AND
SUBSIDIARIES</STRONG><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 25.6pt"
align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG><U>Exhibit
31.2</U></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 7.6pt"
align=justify><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG>Certification
of Chief Financial Officer Required by Rule
13a-14(a)/15d-14(a)</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 25.6pt"
align=center><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG><U>CERTIFICATIONS</U></STRONG></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">
</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">I,
Jack P. Dreimiller, certify that:</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 18pt">&nbsp;</TD>
    <TD style="WIDTH: 18pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">1.</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">I
      have reviewed this Annual Report on Form 10-KSB of Precision Optics
      Corporation, Inc.; </FONT></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 18pt">&nbsp;</TD>
    <TD style="WIDTH: 18pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">2.</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">Based
      on my knowledge, this report does not contain any untrue statement of a
      material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report; </FONT></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 18pt">&nbsp;</TD>
    <TD style="WIDTH: 18pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">3.</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">Based
      on my knowledge, the financial statements, and other financial information
      included in this report, fairly present in all material respects the
      financial condition, results of operations and cash flows of the small
      business issuer as of, and for, the periods presented in this report;
      </FONT></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 18pt">&nbsp;</TD>
    <TD style="WIDTH: 18pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">4.</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">The
      small business issuer's other certifying officer(s) and I are responsible
      for establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small
      business issuer and have: </FONT></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">(a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the small business issuer, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">(b)
Evaluated the effectiveness of the small business issuer's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">(c)
Disclosed in this report any change in the small business issuer's internal
control over financial reporting that occurred during the small business
issuer's most recent fiscal quarter (the small business issuer's fourth fiscal
quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the small business issuer's internal
control over financial reporting; and </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left> </DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 18pt"></TD>
    <TD style="WIDTH: 18pt" align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">5.</FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman">The
      small business issuer's other certifying officer(s) and I have disclosed,
      based on our most recent evaluation of internal control over financial
      reporting, to the small business issuer&#8217;s auditors and the audit committee
      of the small business issuer&#8217;s board of directors (or persons performing
      the equivalent functions): </FONT></TD></TR></TABLE>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left> </DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">(a)
All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to
adversely affect the small business issuer's ability to record, process,
summarize and report financial information; and </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">(b)
Any fraud, whether or not material, that involves management or other employees
who have a significant role in the small business issuer's internal control over
financial reporting. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman">
<DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left> </DIV>
<TABLE cellSpacing=0 cellPadding=0 width="100%" align=center bgColor=#ffffff
border=0>
  <TR vAlign=top bgColor=#ffffff>
    <TD>&nbsp;<BR>&nbsp;</TD>
    <TD>&nbsp;<BR>&nbsp;</TD>
    <TD>&nbsp;<BR>&nbsp;</TD></TR>
  <TR vAlign=top bgColor=#ffffff>
    <TD>Date:&nbsp;March 18, 2005</TD>
    <TD>&nbsp;&nbsp;</TD>
    <TD>/s/&nbsp;Jack P. Dreimiller</TD></TR>
  <TR vAlign=top bgColor=#ffffff>
    <TD colSpan=2>&nbsp;</TD>
    <TD align=left>
      <HR align=left width="80%" color=#808080 noShade SIZE=2>
      Jack P. Dreimiller</TD></TR>
  <TR vAlign=top bgColor=#ffffff>
    <TD colSpan=2>&nbsp;</TD>
    <TD>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Chief
      Financial Officer </FONT></DIV></TD></TR></TABLE>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left> </DIV></DIV></FONT></DIV>
<DIV id=PGBRK
style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt" face="Times New Roman"></FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV></BODY></HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>6
<FILENAME>v014603_ex32-1.htm
<TEXT>
<HTML><HEAD>
<TITLE>
</TITLE>
</HEAD><BODY id=38 bgColor=#ffffff>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><BR>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG>EXHIBIT
32.1</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG>PRECISION
OPTICS CORPORATION, INC.</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG>CERTIFICATION
PURSUANT TO </STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG>SECTION
1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG>AS
ADOPTED PURSUANT TO </STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG>SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">We,
Richard E. Forkey, Chief Executive Officer and Jack P. Dreimiller, Chief
Financial Officer of Precision Optics Corporation, Inc. (the "Company"),
certify, pursuant 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></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify> </DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">(1)
The Annual Report on Form 10-KSB of the Company for the year ended June 30, 2004
(The </FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">"Report")
fully complies with the requirements of Section 13(a) or 15(d) of the Securities
</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">Exchange
Act of 1934 (15 U.S.C. 78 m or 78o(d)); and</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify> </DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">(2)
The information contained in the Report fairly presents, in all material
respects, the financial </FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">condition
and results of operations of the Company. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left> </DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">DATE:&nbsp;March
18, 2005</FONT><FONT id=TAB2
style="COLOR: black; LETTER-SPACING: 27pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;<FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 27pt">&nbsp;&nbsp;&nbsp;</FONT>
</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left> </DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><U>/s/
Richard E. Forkey</U></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">______________________</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">Richard
E. Forkey, Chairman of the Board, Chief </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">Executive
Officer, President and Treasurer</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><U>/s/
Jack P. Dreimiller</U></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">______________________</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">Jack
P. Dreimiller, Senior Vice President Finance,</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">Chief
Financial Officer and Clerk</FONT></DIV>
<DIV></DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt" face="Times New Roman"></FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV></DIV></BODY></HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>7
<FILENAME>v014603_ex99-1.htm
<TEXT>
<HTML><HEAD>
<TITLE>
</TITLE>
</HEAD><BODY id=38 bgColor=#ffffff>
<DIV><BR>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG>EXHIBIT
99.1</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG>PRECISION
OPTICS CORPORATION, INC.</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG>Important
Factors Regarding Forward-Looking Statements</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">In
our annual report on Form 10-KSB for the fiscal year ended June 30, 2004 and
from time to time in public statements made by our management, we have made and
will continue to make forward-looking statements about our business, including
predictions about our future financial performance. </FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><EM>Our
actual results may differ significantly from the results predicted in our annual
report and in future public statements.</EM></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">
Factors that might cause such a difference include, but are not limited to, the
factors discussed below:</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG><EM>Our
Quarterly Financial Results</EM></STRONG></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG>
</STRONG></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG><EM>Depend
on a Large Number of Factors and Therefore May Vary Quarter to Quarter--As a
Result, We Cannot Predict with a High Degree of Certainty Our Operating Results
in Any Particular Fiscal Quarter.</EM></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">Our
quarterly operating results may vary significantly depending upon factors such
as:</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV>
<TABLE id=hangingindent
style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" cellSpacing=0
cellPadding=0 width="100%" align=center border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 18pt">&nbsp;</TD>
    <TD style="WIDTH: 36pt" align=left><FONT face=Symbol>&#183;</FONT><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">
      </FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">the
      timing of completion of significant orders</FONT></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 18pt">&nbsp;</TD>
    <TD style="WIDTH: 36pt" align=left><FONT face=Symbol>&#183;</FONT><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">
      </FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">the
      timing and amount of our research and development expenditures
  </FONT></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 18pt">&nbsp;</TD>
    <TD style="WIDTH: 36pt" align=left><FONT face=Symbol>&#183;</FONT><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">
      </FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">the
      costs of initial product production in connection with new
    products</FONT></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 18pt">&nbsp;</TD>
    <TD style="WIDTH: 36pt" align=left><FONT face=Symbol>&#183;</FONT><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">
      </FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">the
      timing of new product introductions -- both by us and by our
      competitors</FONT></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 18pt">&nbsp;</TD>
    <TD style="WIDTH: 36pt" align=left><FONT face=Symbol>&#183;</FONT><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">
      </FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">the
      timing and level of market acceptance of new products or enhanced versions
      of our existing products</FONT></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 18pt">&nbsp;</TD>
    <TD style="WIDTH: 36pt" align=left><FONT face=Symbol>&#183;</FONT><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">
      </FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">our
      ability to retain existing customers and customers&#8217; continued demand for
      our products and services</FONT></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 18pt">&nbsp;</TD>
    <TD style="WIDTH: 36pt" align=left><FONT face=Symbol>&#183;</FONT><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">
      </FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">our
      customers&#8217; inventory levels, and levels of demand for our customers&#8217;
      products and services</FONT></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 18pt">&nbsp;</TD>
    <TD style="WIDTH: 36pt" align=left><FONT face=Symbol>&#183;</FONT><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">
      </FONT></TD>
    <TD align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">competitive
      pricing pressures </FONT></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">We
cannot be certain whether we will be able to grow or sustain revenues or achieve
or maintain profitability on a quarterly or annual basis or that levels of
revenue and/or profitability may not vary from one such period to another.
</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG><EM>We
May Need to Raise Additional Funds in The Future - If We Cannot Obtain Adequate
Financing on Acceptable Terms When Required, Our Business Will Be Adversely
Affected.</EM></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">We
believe that our existing cash and cash equivalents are sufficient to support
our working capital and investment needs through at least fiscal year 2005,
however, we may need to raise additional capital in the future. We may seek
funding through additional pubic or private equity offerings or debt financings.
Our ability to raise additional capital, however, will be heavily influenced by
the investment market. Additional financing may not be available when needed,
or, if available, may not be available on favorable terms. If we cannot obtain
adequate financing on acceptable terms when such financing is required, our
business will be adversely affected. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" noShade SIZE=1>
</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><STRONG>PRECISION OPTICS CORPORATION, INC. AND
SUBSIDIARIES</STRONG></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG><EM>If
We Cannot Maintain Compliance with the Requirements for Continued Listing on the
Nasdaq SmallCap Market, Our Common Stock Could Be Delisted&#8212;As a Result, the
Market Price and Liquidity of Our Common Stock Might Decline and Our Ability to
Raise Capital Might Be Impaired.</EM></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><FONT id=TAB1 style="MARGIN-LEFT: 18pt"></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; COLOR: #000033; FONT-FAMILY: Times New Roman, serif">Effective
as of the opening of business on January 29, 2003, we effected a reverse stock
split of our Common Stock. The purpose of the reverse stock split was to
increase the per share price of our Common Stock in order to comply with the
minimum bid price listing of Nasdaq. We had previously been notified that we
were not in compliance with the $1.00 minimum share price requirement for
continued listing on the Nasdaq SmallCap Market. In order to regain compliance,
the bid price of our Common Stock had to close at or above $1.00 per share for a
minimum of 10 consecutive trading days. On each of the 10 consecutive trading
days including and following January 29, 2003, the bid price of our Common Stock
closed at or above $1.00 per share. Accordingly, we regained compliance with the
minimum share price requirement for continued listing on the Nasdaq SmallCap
Market. There can be no assurance, however, that the market price of our Common
Stock will not subsequently decrease to a level that causes us to again face
de-listing, or that our market capitalization will not subsequently be less than
our market capitalization before the reverse stock split. The delisting of our
Common Stock from the Nasdaq SmallCap Market may materially impair your ability
to buy and sell shares of our Common Stock and could have an adverse effect on
the market price of, and the efficiency of the trading market for, our Common
Stock. In addition, the delisting of our Common Stock could significantly impair
our ability to raise capital should we desire to do so in the future. There is
no assurance that we will continue to comply with the minimum bid or other
continuing listing requirements of the Nasdaq SmallCap Market.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG><EM></EM></STRONG></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG><EM>We
Rely on a Small Number of Customers and Cannot Be Certain They Will Consistently
Purchase Our Products in the Future.</EM></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">In
the fiscal year ended June 30, 2004, our two largest customers represented
approximately 24% and 22%, respectively, of our total revenues. In the fiscal
year ended June 30, 2003, our two largest customers represented approximately
44% and 17%, respectively, of our total revenues. In the fiscal year ended June
30, 2002, our largest customers represented approximately 23% and 18%,
respectively, of our total revenues. No other customer accounted for more than
10% of our revenues during those periods.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">In
the future, a small number of customers may continue to represent a significant
portion of our total revenues in any given period. We cannot be certain that
such customers will consistently purchase our products at any particular rate
over any subsequent period.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG><EM>We
Rely Heavily Upon the Talents</EM></STRONG></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">
</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG><EM>of
Our Chief Executive Officer and Chief Scientist, The Loss of Whom Could Severely
Damage Our Business.</EM></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">Our
performance depends to a large extent on a small number of key scientific,
technical, managerial, and marketing personnel. In particular, we believe our
success is highly dependent upon the services and reputation of our Chief
Executive Officer, Mr. Richard E. Forkey. Loss of Mr. Forkey&#8217;s services could
severely damage our business. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">Additionally,
Dr. Joseph N. Forkey was appointed our Chief Scientist in September 2003. Dr.
Forkey&#8217;s appointment is expected to provide us with significant additional
capabilities in optical instrument development, in management of new technology
and in potentially significant longer-term initiatives in Biophysics and
Biomedical instrumentation, as well as new photonics-based market opportunities.
Dr. Forkey, in his capacity as Chief Scientist, expects to continue to explore
the development and application of optical-based microscopic single-molecule
technologies. The loss of Dr. Forkey&#8217;s scientific contributions could severely
damage our business.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" noShade SIZE=1>
&nbsp;<BR>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><STRONG>PRECISION OPTICS CORPORATION, INC. AND
SUBSIDIARIES</STRONG></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG><EM></EM></STRONG></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG><EM>We
Must Continue to be Able to Attract Employees With the Scientific and Technical
</EM></STRONG></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG><EM>Skills
That our Business Requires--If We Are Unable to Attract and Retain Such
Individuals, Our Business Could Be Severely Damaged.</EM></STRONG></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG>
</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">Our
ability to attract employees with a high degree of scientific and technical
talent is crucial to the success of our business. There is intense competition
for the services of such persons, and we cannot guarantee that we will be able
to attract and retain individuals possessing the necessary qualifications.
</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG><EM>We
Have a Number of Large, Well-Financed Competitors Who Have Research and
Marketing Capabilities That Are Superior to Ours.</EM></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">The
industries in which we compete are highly competitive. Many of our existing and
potential competitors have greater financial resources and manufacturing
capabilities, more established and larger marketing and sales organizations and
larger technical staffs than we have. Other companies, some with greater
experience in the telecommunications, optics, semiconductor or medical products
industries, are seeking to produce products and services that compete with our
products and services.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG><EM>We
Are Subject to a High Degree of Regulatory Oversight--We Cannot Be Certain That
We Will Continue to Receive the Necessary Regulatory
Approvals.</EM></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">The
FDA has allowed us to market the medical products we currently sell in the
United States. However, prior FDA approval may be required before we can market
additional medical products that we may develop in the future. We may also seek
to sell current or future medical products in a manner that requires us to
obtain FDA permission to market such products. We may also require the
regulatory approval or license of other federal, state or local agencies or
comparable agencies in other countries. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">We
cannot be certain that we will continue to receive the FDA&#8217;s permission to
market our current products or obtain the necessary regulatory permission,
approvals or licenses for the marketing of any of our future products. Also, we
cannot predict the impact on our business of FDA regulations or determinations
arising from future legislation or administrative action. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG><EM>We
Face Risks Inherent in Product Development and Production Under Fixed Price
Contracts--We Cannot Be Sure That These Contracts Will Be Profitable over
Time.</EM></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">A
significant portion of our business has been devoted to research, development
and production under fixed price contracts. For our purposes, a fixed price
contract is any contract under which we will provide products or services for a
fixed price over an extended period of time (usually six months or longer). In
our 2004, 2003, and 2002 fiscal years, fixed price contracts represented
approximately 29%, 64% and 58%, respectively, of our total revenues. We expect
that revenues from fixed price contracts will continue to represent a
significant portion of our total revenues in future fiscal years. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">Because
they involve performance over time, we cannot predict with certainty the
expenses involved in meeting our obligations under fixed price contracts.
Therefore, we can never be sure at the time we enter into any single fixed price
contract that such contract will be profitable for us. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" noShade SIZE=1>
&nbsp;<BR>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><STRONG>PRECISION OPTICS CORPORATION, INC. AND
SUBSIDIARIES</STRONG></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><STRONG></STRONG>&nbsp;</DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG><EM>Third
Parties May Infringe on Our Patents--As a Result, We Could Incur Significant
Expense in Protecting Our Patents or Not Have Sufficient Resources to Protect
Them.</EM></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">We
hold a number of patents that are important to our business. Although we are not
currently aware of any past or present infringements of our patents, we plan to
protect these patents from infringement and obtain additional patents whenever
feasible. To this end, we have obtained confidentiality agreements from our
employees and consultants and others who have access to the design of our
products and other proprietary information. Protecting and obtaining patents,
however, is both time consuming and expensive. We therefore may not have the
resources necessary to assert all potential patent infringement claims or pursue
all patents that might be available to us. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG><EM>Third
Parties May Claim that We Have Infringed on Their Patents--As a Result, We Could
Be Prohibited from Using All or Part of Any Technology Used in Our
Products.</EM></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">Should
third parties claim a proprietary right to all or part of any technology that we
use in our products, such a claim, regardless of its merit, could involve us in
costly litigation. If successful, such a claim could also result in us being
unable to freely to use the technology that was the subject of the claim, or
sell products embodying such technology.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG><EM>We
Depend on the Availability of Certain Key Supplies and Services That Are
Available From Only a Few Sources--If We Experience Difficulty with a Supplier,
We May Have Difficulty Finding Alternative Sources of
Supply.</EM></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">Certain
key supplies used in our products, particularly precision grade optical glass,
are available from only a few sources, each of which is located outside the
United States. Also, outside vendors grind and polish certain of our lenses and
other optical components, such as prisms and windows. Based upon our ordering
experience to date, we believe the materials and services required for the
production of our products are currently available in sufficient quantities. Our
requirements are small relative to the total supply, and we are not currently
encountering problems with availability. However, this does not mean that we
will continue to have timely access to adequate supplies of essential materials
and services in the future or that supplies of these materials and services will
be available on satisfactory terms when the need arises. Our business could be
severely damaged if we become unable to procure essential materials and services
in adequate quantities and at acceptable prices. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">From
time to time, certain of our products may be produced for us by subcontractors,
and our business is subject to the risk that these subcontractors fail to make
timely delivery. Our products and services are also from time to time used as
components of the products and services of other manufacturers. We are therefore
subject to the risk that manufacturers that integrate our products or services
into their own products or services are unable to acquire essential supplies and
services from third parties in a timely fashion.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG><EM>Our
Customers May Claim that the Products We Sold Them Were Defective--If Our
Insurance Is Not Sufficient to Cover a Claim, We Would Be Liable for the
Excess.</EM></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">Like
any manufacturer, we are and always have been exposed to liability claims
resulting from the use of our products. We maintain product liability insurance
to cover us in the event of liability claims, and no such claims have been
asserted or threatened against us to date. However, we cannot be certain that
our insurance will be sufficient to cover all possible future product
liabilities. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" noShade SIZE=1>
&nbsp;<BR>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><STRONG>PRECISION OPTICS CORPORATION, INC. AND
SUBSIDIARIES</STRONG></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif"><STRONG><EM>We
Would Be Liable If Our Business Operations Harmed the Environment--Failure to
Maintain Compliance with Environmental Laws Could Severely Damage Our
Business.</EM></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, serif">Our
operations are subject to a variety of federal, state and local laws and
regulations relating to the protection of the environment. From time to time, we
use hazardous materials in our operations. Although we believe that we are in
compliance with all applicable environmental laws and regulations, our business
could be severely damaged by any failure to maintain such compliance.
</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt" face="Times New Roman"></FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV></DIV></BODY></HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>8
<FILENAME>filename8.htm
<TEXT>
<HTML><HEAD>
<TITLE>
</TITLE>
</HEAD><BODY id=38 bgColor=#ffffff>
<DIV><BR>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">[Letterhead
of Precision Optics Corporation, Inc.]</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 180pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 180pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">March 18,
2005<BR></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">POC:25-0106&nbsp;&nbsp;&nbsp;&nbsp;
</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 180pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mr.
Daniel L. Gordon</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Branch
Chief</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Division
of Corporation Finance</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">United
States Securities and Exchange Commission</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Washington,
DC 20549</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 180pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV align=left>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=top align=left width="5%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Re:</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=top align=left width="95%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Precision
      Optics Corporation, Inc.</FONT></DIV></TD></TR>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=top align=left
    width="5%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=top align=left width="95%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
      10-KSB for the Year Ended June 30, 2004</FONT></DIV></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 180pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Dear Mr.
Gordon:</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
connection with our response to the comments in your letter of March 7, 2005,
Precision Optics Corporation, Inc. (the &#8220;Company&#8221;) acknowledges
that:</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV>
<TABLE id=list style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"
cellSpacing=0 cellPadding=0 width="100%">
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 45pt" align=right><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&nbsp;&nbsp;&nbsp;&nbsp;
      &nbsp;</FONT></TD>
    <TD>
      <DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"
      align=justify><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company is responsible for the adequacy and accuracy of the disclosure in
      the filings; </FONT></DIV></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=list cellSpacing=0 cellPadding=0 width="100%">
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 45pt" align=right><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&nbsp;&nbsp;&nbsp;&nbsp;
      &nbsp;</FONT></TD>
    <TD>
      <DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"
      align=justify><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Staff
      comments or changes to disclosure in response to staff comments in the
      filings reviewed by the staff do not foreclose the Commission from taking
      any action with respect to the filing; and</FONT></DIV></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=list cellSpacing=0 cellPadding=0 width="100%">
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 45pt" align=right><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&nbsp;&nbsp;&nbsp;&nbsp;
      &nbsp;</FONT></TD>
    <TD>
      <DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"
      align=justify><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company may not assert staff comments as a defense in any proceeding
      initiated by the Commission or any person under the federal securities
      laws of the United States.</FONT></DIV></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Following
are the Company&#8217;s responses to your comments:</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Comment:</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV align=left>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=top align=left width="5%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=top align=left width="95%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      noted on page 3 that you sell certain services to your customers in
      addition to products. Supplementally, and in future filings, expand your
      revenue recognition policy to:</FONT></DIV></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV>
<TABLE id=list cellSpacing=0 cellPadding=0 width="100%">
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 90pt" align=right><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      </FONT></TD>
    <TD>
      <DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"
      align=justify><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Tell
      us how you recognize revenue for services. Include in your discussion how
      the company considers each of the criteria in SAB Topic
      13.A.1.</FONT></DIV></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=list cellSpacing=0 cellPadding=0 width="100%">
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 90pt" align=right><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD>
      <DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"
      align=justify><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Provide
      details of whether any of your revenue transactions have <FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">multiple
      deliverables. </FONT></FONT></DIV></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Response:</FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 18pt">&nbsp;</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
services that the Company provides to customers consist of repairs and
engineering design and development. Revenues from services are typically a small
percentage of total revenues, and for the years ended June 30, 2004, 2003 and
2002 were approximately 3.9%, 2.0% and 2.7%, respectively, of total revenues.
</FONT></DIV><BR>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt" face="Times New Roman"></FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV><BR>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Recognition
of service revenue occurs after consideration of the following
criteria:</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV>
<TABLE id=list style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"
cellSpacing=0 cellPadding=0 width="100%">
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 126pt" align=right><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a.<FONT
      id=TAB2
    style="LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT>&nbsp;&nbsp;</FONT></TD>
    <TD>
      <DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"
      align=justify><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Determination
      that a purchase order or sales contract properly executed by the customer
      has been received and accepted, and which specifies the type of service to
      be performed.</FONT></DIV></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV>
<TABLE id=list cellSpacing=0 cellPadding=0 width="100%">
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 126pt" align=right><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">b.<FONT
      id=TAB2
    style="LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT>&nbsp;&nbsp;</FONT></TD>
    <TD>
      <DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"
      align=justify><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Delivery
      to the customer of the repaired product has occurred, or in the case of
      engineering design and development services, that the design or a
      prototype instrument has been delivered to the
customer.</FONT></DIV></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV>
<TABLE id=list cellSpacing=0 cellPadding=0 width="100%">
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 126pt" align=right><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">c.<FONT
      id=TAB2
    style="LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT>&nbsp;&nbsp;</FONT></TD>
    <TD>
      <DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"
      align=justify><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Determination
      that the price specified in the customer&#8217;s purchase order or sales
      contract is fixed or determinable, and is not subject to refund or
      adjustment.</FONT></DIV></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV>
<TABLE id=list cellSpacing=0 cellPadding=0 width="100%">
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 126pt" align=right><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">d.<FONT
      id=TAB2
    style="LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT>&nbsp;&nbsp;</FONT></TD>
    <TD>
      <DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"
      align=justify><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Determination
      that collectibility of amounts to be billed are reasonably assured based
      on past experience with the customer or, in the case of new customers,
      review of customer credit references, D&amp;B reports, etc.
    </FONT></DIV></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">None of
the Company&#8217;s revenue transactions have multiple deliverables.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Comment:</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV align=left>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left></DIV>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=top align=left width="5%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=top align=left width="95%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Please
      also tell us at what point the sales price of products and services sold
      are fixed and determinable. We noted your comment included in your
      critical accounting policies and estimates whereby you state that the
      &#8220;determination of criteria (3) and (4) are based on management&#8217;s judgments
      regarding the fixed nature of the price to the buyer charged for products
      delivered&nbsp;or services rendered &#8230;&#8221; Tell us how you considered SAB
      Topic 13.A.4.</FONT></DIV></TD></TR></TABLE>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Response:</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT size=2></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT size=2></FONT>
<DIV>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=top align=left width="5%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=top align=left width="95%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Sales
      price of products and services sold is fixed and determinable after
      receipt and acceptance of a customer&#8217;s purchase order or properly executed
      sales contract, typically before any work is performed. Management reviews
      each customer purchase order or sales contract to determine that the work
      to be performed is specified and there are no unusual terms and conditions
      which would raise questions as to whether the sales price is fixed or
      determinable. The Company does not have a history of issuing any
      significant or unusual adjustments to customers on our sales transactions.
      Management&#8217;s judgment is used to determine if collectibility is reasonably
      assured. The Company does not have a history of experiencing significant
      collection issues on amounts billed for products or
    services.</FONT></DIV></TD></TR></TABLE></DIV></DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt" face="Times New Roman"></FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV></DIV><BR>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In future
filings, the Company will expand its revenue recognition policy, as appropriate,
with respect to your comments.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Comment:</FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 36pt">&nbsp;</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV align=left>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=top align=left width="5%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=top align=left width="95%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      note your disclosures that &#8220;the company&#8217;s Chief Executive Officer and
      Principal Financial Officer have conducted an evaluation of the Company&#8217;s
      disclosure controls and procedures and based on this evaluation, the CEO
      and PFO have concluded that the company&#8217;s disclosure controls and
      procedures are effective to ensure that the 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.&#8221; Amend your 10-KSB to clarify, if
      true, that your officers concluded that your disclosure controls and
      procedures are also effective to ensure that information required to be
      disclosed in the reports that you file or submit under the Exchange Act is
      accumulated and communicated to your management, including your chief
      executive officer and principal financial officer, to allow timely
      decisions regarding required disclosure. See Exchange Act Rule 13a-15(e).
      </FONT></DIV></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Response:</FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 27pt">&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
requested clarification has been made in the Company&#8217;s Form 10-KSB/A filed
contemporaneously herewith.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 126pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Comment:</FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 126pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV align=left>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR>
    <TD style="BORDER-BOTTOM: medium none" vAlign=top align=left width="5%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.</FONT></DIV></TD>
    <TD style="BORDER-BOTTOM: medium none" vAlign=top align=left width="95%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=left><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      noted that the certifications filed as Exhibits 31.1 and 31.2 were not in
      the proper form. The required certifications must be in the exact form
      prescribed; the wording of the required certifications may not be changed
      in any respect, except for the modifications temporarily permitted to be
      made to the fourth paragraph of the certification required to be filed as
      Exhibit 31.1 pursuant to Part III.E of Release No. 8238. Accordingly,
      please file an amendment to your Form 10-KSB that includes the entire
      filing together with the certifications of each of your current CEO and
      CFO in the form currently set forth in Item 601(b)(31) of Regulation
      S-B.</FONT></DIV></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 45pt; TEXT-INDENT: -45pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 45pt; TEXT-INDENT: -45pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Response:
The incorrect language contained in paragraph 5 of each of Exhibit 31.1 and
Exhibit 31.2 was due to a production error at the Company&#8217;s financial printer.
Exhibits 31.1 and 31.2 to the Company&#8217;s Form 10-KSB/A filed contemporaneously
herewith contain the correct language.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 45pt; TEXT-INDENT: -45pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If you
have additional questions or comments, please do not hesitate to contact
me.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left></DIV>
<TABLE cellSpacing=0 cellPadding=0 width="100%" align=center bgColor=#ffffff
border=0>
  <TR vAlign=top bgColor=#ffffff>
    <TD width="50%"><FONT face="Times New Roman" size=2>&nbsp;</FONT></TD>
    <TD width="1%"><FONT face="Times New Roman" size=2>&nbsp;</FONT></TD>
    <TD width="49%"><FONT face="Times New Roman" size=2>&nbsp;</FONT></TD></TR>
  <TR vAlign=top bgColor=#ffffff>
    <TD><FONT face="Times New Roman" size=2>&nbsp;</FONT></TD>
    <TD colSpan=2><FONT face="Times New Roman" size=2>Very truly
    yours,</FONT></TD></TR>
  <TR vAlign=top bgColor=#ffffff>
    <TD><FONT face="Times New Roman" size=2>&nbsp;<BR>&nbsp;</FONT></TD>
    <TD><FONT face="Times New Roman" size=2>&nbsp;<BR>&nbsp;</FONT></TD>
    <TD><FONT face="Times New Roman" size=2>&nbsp;<BR>&nbsp;</FONT></TD></TR>
  <TR vAlign=top bgColor=#ffffff>
    <TD><FONT face="Times New Roman" size=2></FONT></TD>
    <TD><FONT face="Times New Roman" size=2>By:&nbsp;&nbsp;</FONT></TD>
    <TD><FONT face="Times New Roman" size=2>/s/&nbsp;Jack P.
    Dreimiller</FONT></TD></TR>
  <TR vAlign=top bgColor=#ffffff>
    <TD colSpan=2><FONT face="Times New Roman" size=1>&nbsp;</FONT></TD>
    <TD align=left>
      <HR align=left width="80%" color=#000000 noShade SIZE=2>
      <FONT size=2>Jack P. Dreimiller</FONT></TD></TR>
  <TR vAlign=top bgColor=#ffffff>
    <TD colSpan=2><FONT face="Times New Roman" size=2>&nbsp;</FONT></TD>
    <TD><FONT face="Times New Roman" size=2>Chief Financial
  Officer</FONT></TD></TR></TABLE>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">JPD:pg</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left>&nbsp;</DIV>
<DIV></DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt" face="Times New Roman"></FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV></DIV></BODY></HTML>

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
