The decrease from the prior fiscal year was primarilyattributable to lower sales volumes of molded optics, collimators andgradium. Thenet loss for the quarter ended December 31, 2008 included $641,000 incharges related to fees, debt costs, and debt discount write-offsassociated with the conversion of 25% of outstanding debentures intocommon stock.Weighted-average shares outstanding increased in the third quarter offiscal 2009 compared to the third quarter in fiscal 2008 primarily due tothe issuance of common shares related to the debenture conversion and theprepayment of interest in common shares.Financial Results for the Nine Months Ended March 31, 2009Revenue for the nine months ended March 31, 2009 totaled $5.9 millioncompared to $6.4 million for the first nine months of fiscal 2008, adecrease of 8%. This compared to a net loss of $1.7 million or $0.29 perbasic and diluted share for the second quarter of fiscal 2009 endedDecember 31, 2008 This represents a $969,000 decrease in net loss. As a result, total operating lossfor the third quarter of fiscal 2009 improved to $0.6 million compared toa loss of $1.2 million for the same period in fiscal 2008.Net loss for the third quarter of fiscal 2009 ended March 31, 2009 was$756,000 or $0.11 per basic and diluted share, compared with a net loss of$1.2 million or $0.22 per basic and diluted share for the same period infiscal 2008.

Included in total costs and expenses for fiscal 2009 were$817,000 in selling, general and administrative expenses which for thethird quarter of fiscal 2009 decreased $455,000 or 36% from $1.3 millionfor the same period in the prior year. Grossmargins improved as a result of the cost reduction programs the Companyhas implemented.During the third quarter of fiscal 2009 total costs and expenses decreased$591,000 to $1.0 million compared to $1.6 million for the same period infiscal 2008. Totalmanufacturing cost of $1.2 million was $0.5 million lower in the thirdquarter of fiscal 2009 compared to the same period of the prior fiscalyear. Direct costs, which include material, labor and services, werereduced 3% points to 21% of revenue in the third quarter of fiscal 2009,as compared to 24% of revenue in the third quarter of fiscal 2008.

Growth in sales going forward is expected to bederived primarily from the precision molded optics product line driven bylow cost lenses in Asia and our infrared lenses.Our gross margin percentage in the third quarter of fiscal 2009 comparedto third quarter fiscal 2008 increased to 25% from 20%. Asthe full impact of these improvements are realized and our forecastedrevenues are achieved, we believe we will see continued reductions ofcash used in operations.”Financial Results for Three Months Ended March 31, 2009Revenue for the third quarter of fiscal 2009 ended March 31, 2009 totaled$1.66 million compared to $2.11 million for the third quarter of fiscal2008, a decrease of 22%. The decrease from the third quarter of last yearwas primarily attributable to lower sales volumes of molded opticsproducts and isolators. In addition weimplemented a 20% salary reduction for the majority of our US basedpersonnel in March 2009.

All of these changes has resulted in a reductionof our cash used in operations by 94% from the first fiscal quarter of2009 compared to the third fiscal quarter of 2009 and 81% from the secondfiscal quarter of 2009 compared to the third fiscal quarter of 2009. As a result of the productivity improvements in Shanghai, we havereduced the workforce there by 20% since December 2008. Wehave also implemented new programs to reduce our service costs aimed attooling and our anti-reflective coating processes. As these programs comeon line we expect to see continued improvement in our direct costs infuture quarters.”"Additionally we have implemented a series of overhead cost reductions.With the transfer of the majority of our manufacturing operations toShanghai, workforce in Orlando has been reduced by 42% since December2007. We are also continuing to convert tohigh temperature, lower cost glass materials, when combined with the 20percentage point improvement in yield has lowered our material costs. Production yields forthe first nine months of fiscal 2009 averaged 87% compared to an averageof 67% for the fiscal year 2008.