Semiconductors are the engines of the electronic world. Every electronic product contains one or more semiconductors. The market for semiconductor ICs has expanded rapidly over recent decades as semiconductor manufacturers have produced devices with increased functionality and smaller sizes at lower costs. Growth in the IC industry has been driven both by the development of new electronic products, such as portable music and video players, cellular phones, digital cameras and PDAs, as well as an increase in IC content in applications such as automobiles, telecommunications and home appliances. According to Gartner, an independent research firm, the overall semiconductor industry will grow from $219.9 billion in 2004 to $302.3 billion in 2008, representing a compound annual growth rate of 8.3%.

Memory has become an increasingly important part of the IC market. According to Gartner, memory has grown from $26.7 billion, or 17.4% of the total semiconductor market in 2001 to $48.0 billion, or 21.8% of the total semiconductor market in 2004. Memory is available in many different types, including dynamic random access memory, or DRAM, and flash memory, to serve a variety of different purposes. The principal advantages of flash memory over other types of memory are that it maintains its data without any external power source and that it can be easily erased and reprogrammed. Flash memory is used for fast and easy information storage in numerous end markets but has been used most effectively in consumer digital products, including portable music players, cellular phones, digital cameras, and USB flash drives.

According to Gartner, the flash memory market is expected to grow from 82.1 billion megabytes in 2004 to 1,819.8 billion megabytes in 2008, representing a compound annual growth rate of 117.0%. The rapid growth in the flash memory market is driven by the increasing proliferation of flash-intensive consumer digital products and the increasing amounts of flash memory capacity incorporated in them.

Over the past several years, the Company has become a market leader in manufacturing premium progressive lenses in a wide range of materials. These lenses are sold under the Company’s own brand names as well as private labels. The Company currently produces over 50 principal types of progressive lenses, which differ from one another in design, color and lens material, as well as in size and shape.

The Company also produces lenses under its Autograph brand using its new proprietary free form production method known as its Direct Lens Technology. The Company released this technology in the first quarter of 2004. The Company’s Direct Lens Technology creates a unique personal computer file for a customized progressive lens by combining the patient's exact vision requirements with its proprietary Eye Point Technology. This file can be transferred to advanced cutting and polishing machinery for mold-free lens production. This single process yields a finished lens that contains both the progressive and prescription characteristics and does not require any further surfacing. In addition, this process allows the optical laboratory to place both the progressive and prescription characteristics on the back surface of the lens, which is closer to the patient's eye, thereby enhancing the field of view.

The Company provides third party lens manufacturers with research and development services in which the Company develops new optical designs and related software tools designed for the production processes of lenses and for which the Company receives ongoing payments and future revenues from royalties.

The Company specializes in the design and manufacture of sophisticated progressive lens molds for use by plastic lens manufacturers. The Company believes its customers value the Company’s ability to design tailor-made optical molds to satisfy precise requirements regarding size, base curves, markings and other properties. The Company designs and produces several different molds that can be easily adapted to customer needs by changing characteristics including invisible markings, edge configuration and thickness.

Gross profit was $8.8 million, or 51.1% of net revenue in the three months ended September 2005 and $7.4 million, or 50.4% of net revenue in the three months ended September 2004, an increase of $1.4 million, or 18.6%.

R&D expense was $1.7 million, or 10.1% of net revenue in the three months ended September 2005 and $1.6 million, or 10.9% of net revenue in the three months ended September 2004.

General and administrative expense was $4.6 million, or 26.9% of net revenue in the three months ended September 2005 and $4.0 million, or 27.4% of net revenue in the three months ended September 2004, an increase of $0.6 million, or 15.2%.

Income tax provision was $0.9 million, a 35.0% effective tax rate in the three months ended September 2005 and $0.7 million, a 36.9% effective tax rate, in the three months ended September 30, 2004, an increase of $0.2 million, or 30.7%.