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    <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>UNITED
      STATES</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: 10pt; FONT-FAMILY: Times New Roman"><strong>SECURITIES
      AND EXCHANGE COMMISSION </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: 10pt; FONT-FAMILY: Times New Roman"><strong>WASHINGTON,
      D.C. 20549 </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <hr style="COLOR: black" align="center" noshade size="1" width="25%">
    </div>
    <div>&#160;</div>
    <div>&#160;</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: 14pt; FONT-FAMILY: Times New Roman"><strong>FORM
      8-K </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</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>CURRENT
      REPORT </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: 10pt; FONT-FAMILY: Times New Roman"><strong>Pursuant
      to Section 13 or 15(d) of the </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: 10pt; FONT-FAMILY: Times New Roman"><strong>Securities
      Exchange Act of 1934</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</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>Date
      of report (Date of earliest event reported): May 12, 2006</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</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">
        <hr style="COLOR: black" align="center" noshade size="1" width="25%">
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</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: 24pt; FONT-FAMILY: Times New Roman"><strong>QPC
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      <hr style="COLOR: black" align="center" noshade size="1" width="25%">
    </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>(Exact
      name of registrant as specified in charter) </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"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(formerly
      known as Planning Force, Inc.)</strong></font></div>
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    <div>
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                File No.)</strong></font></div>
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            <td align="left" valign="bottom" width="2%">
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                Employee Identification
                No.)</strong></font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</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>15632
      Roxford Street</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: 10pt; FONT-FAMILY: Times New Roman"><strong>Sylmar,
      California 91342</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">
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      </div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(Address
      of Principal Executive Offices) </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</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>(818)
      986-0000</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
        <hr style="COLOR: black" align="center" noshade size="1" width="25%">
      </div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(Issuer
      Telephone number) </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</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">Check
      the
      appropriate box below if the Form 8-K filing is intended to simultaneously
      satisfy the filing obligation of the registrant under any of the following
      provisions (see General Instruction A.2. 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: 10pt; FONT-FAMILY: Times New Roman">[&#160;
      ]&#160;&#160;&#160; Written communications pursuant to Rule 425 under the
      Securities Act (17 CFR 230.425)</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">[&#160;
      ]&#160;&#160;&#160; Soliciting material pursuant to Rule 14a-12(b) under the
      Exchange Act (17 CFR 240.14a-12(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: 10pt; FONT-FAMILY: Times New Roman">[&#160;
      ]&#160;&#160;&#160; Pre-commencement communications pursuant to Rule 14d-2(b)
      under the Exchange Act (17 CFR 240.14d-2(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: 10pt; FONT-FAMILY: Times New Roman">[&#160;
      ]&#160;&#160;&#160; Pre-commencement communications pursuant to Rule 13e-4(c)
      under the Exchange Act (17 CFR 240.13e-4(c))</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
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    <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>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">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; 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
      Form
      8-K and other reports filed by Registrant from time to time with the Securities
      and Exchange Commission (collectively the &#8220;Filings&#8221;) contain or may contain
      forward looking statements and information that are based upon beliefs of,
      and
      information currently available to, Registrant&#8217;s management as well as estimates
      and assumptions made by Registrant&#8217;s management. When used in the filings the
      words &#8220;anticipate&#8221;, &#8220;believe&#8221;, &#8220;estimate&#8221;, &#8220;expect&#8221;, &#8220;future&#8221;, &#8220;intend&#8221;, &#8220;plan&#8221;
or the negative of these terms and similar expressions as they relate to
      Registrant or Registrant&#8217;s management identify forward looking statements. Such
      statements reflect the current view of Registrant with respect to future events
      and are subject to risks, uncertainties, assumptions and other factors
      (including the risks contained in the section of this report entitled &#8220;Risk
      Factors&#8221;) relating to Registrant&#8217;s industry, Registrant&#8217;s operations and results
      of operations and any businesses that may be acquired by Registrant. Should
      one
      or more of these risks or uncertainties materialize, or should the underlying
      assumptions prove incorrect, actual results may differ significantly from those
      anticipated, believed, estimated, expected, intended or planned. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Although
      Registrant believes that the expectations reflected in the forward looking
      statements are reasonable, Registrant cannot guarantee future results, levels
      of
      activity, performance or achievements. Except as required by applicable law,
      including the securities laws of the United States, Registrant does not intend
      to update any of the forward-looking statements to conform these statements
      to
      actual results. The following discussion should be read in conjunction with
      Registrant&#8217;s pro forma financial statements and the related notes that will be
      filed herein.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      1.01 Entry into a Material Definitive Agreement.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
      more
      fully described in Item 2.01 below, on May 12, 2006, QPC Lasers, Inc. (the
      &#8220;Registrant&#8221; or &#8220;QLI&#8221;) executed a Share Exchange Agreement (&#8220;Exchange
      Agreement&#8221;) by and among Julie Morin (referred to as the &#8220;Majority Shareholder&#8221;)
      and the Registrant on the one hand, and Quintessence Photonics Corporation,
      a
      Delaware corporation (&#8220;Target&#8221; or &#8220;QPC&#8221;), and the shareholders of substantially
      all of Target&#8217;s common stock (the &#8220;Target Shareholders&#8221;) on the other hand.
      Under the Exchange Agreement, on the Closing Date, the Registrant issued one
      share of the Registrant&#8217;s Common Stock (the &#8220;QLI Shares&#8221;) to the Target
      Shareholders in exchange for each share of Target common stock and issued an
      aggregate of&#160;26,986,119 QLI Shares (&#8220;Target Shares&#8221;). In addition, all
      options, warrants and convertible notes (&#8220;Derivative Security&#8221;) that may be
      exercised or converted into Target Shares shall be exchanged for Derivative
      Securities that may be exercised or converted into QLI Shares. The number of
      QLI
      Shares underlying the new QLI Derivative Security will equal the number of
      QLI
      Shares that would have been issued to the Target security holder, had he
      exercised or converted the Target Derivative Security into Target Shares
      immediately prior to the Closing. Pursuant to the Exchange Agreement, QLI issued
      options, warrants or convertible notes that may be exercised or converted,
      as
      the case may be, into&#160;10,776,879 QLI Shares. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      QLI
      Shares issued at closing shall equal at least 87% of the outstanding shares
      of
      the Registrant&#8217;s common stock. In addition, on the Closing Date, Target will
      purchase 48,294,115 QLI Shares from Julie Morin for $250,000. Target has since
      retired these 48,294,115 shares. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      closing of this transaction (the &#8220;Closing&#8221;) occurred on May 12, 2006 (the
&#8220;Closing Date&#8221;).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      2.01 Acquisition or Disposition of Assets</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Under
      the
      Exchange Agreement, on the Closing Date, the Registrant issued QLI Shares to
      the
      Target Shareholders in exchange for at least 98% of the capital stock of Target.
      The Registrant issued one QLI Share to the Target Shareholders in exchange
      for
      every Target Share. In total, the Registrant issued&#160;26,986,119 QLI Shares
      to Target Shareholders. In addition, all options, warrants and convertible
      notes
      (&#8220;Derivative Securities&#8221;) that may be exercised or converted into Target Shares
      were exchanged for Derivative Securities that may be exercised or converted
      into
      QLI Shares. The number of QLI Shares underlying the new QLI Derivative Security
      will equal the number of QLI Shares that would have been issued to the Target
      security holder, had such holder exercised or converted the Target Derivative
      Security into Target Shares immediately prior to the Closing. As a result of
      the
      Exchange, Target shareholders owned 87% of QLI after the Closing
      Date.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      addition, on the Closing Date, Target will purchase 48,294,115 QLI Shares from
      Julie Morin for $250,000 in cash. Target has since retired these 48,294,115
      shares. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; 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
      acquisition will be accounted for as a reverse merger (recapitalization) with
      QPC deemed to be the accounting acquirer and QLI deemed to be the legal
      acquirer.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      parties&#8217; completion of the transactions contemplated under the Exchange
      Agreement (the &#8220;Closing&#8221;) were subject to the satisfaction of certain
      contingencies including, without limitation, the lack of breach of any
      representations and warranties and performance of certain covenants</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>.</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      directors of the Registrant and holders of a majority of QLI Shares have
      approved the Exchange Agreement and the transactions contemplated thereunder.
      Target&#8217;s directors and the Target Shareholders have approved the Exchange
      Agreement and the transactions contemplated thereunder (the &#8220;Exchange
      Transaction&#8221;). </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      closing of this transaction (the &#8220;Closing&#8221;) occurred on May 12, 2006 (the
&#8220;Closing Date&#8221;). </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">Prior
      to
      the transaction, the Registrant was a company providing event and retreat
      planning services for corporate customers. Since inception in August 2004,
      this
      business has generated minimal revenue for the Registrant. From and after the
      Closing Date, the Registrant&#8217;s primary operations will now consist of the
      operations of Target.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; 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
      this
      report, when we use phrases such as "we," "our," "company," "us," we are
      referring to QPC Lasers, Inc. and Target as a combined entity.</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: 10pt; FONT-FAMILY: Times New Roman"><strong><u>DESCRIPTION
      OF BUSINESS</u></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"><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">Target
      was founded in November 2000 with backing from strategic and venture capital
      investors to design and manufacture next-generation, high performance
      semiconductor lasers and associated optical components. Our proprietary
      technology platform was developed by a staff that includes ten Ph.D.s as well
      as
      other eminent scientists and engineers in the field of high-powered lasers.
      Our
      intellectual property consists of 16 patents (three issued and 13 pending)
      as
      well as trade secrets, and is expected to, over the next 12 to 24 months, enable
      QPC to introduce high performance, low-cost lasers to address a multi-billion
      dollar global marketplace. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</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">&#160;&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.4pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Overview</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      design
      and manufacture next-generation high brightness lasers for a variety of
      commercial and military purposes. We believe our technology platform will enable
      us to replace or improve legacy laser technologies embedded in the manufacturing
      infrastructure of the industrialized world, and could enable the widespread
      deployment of directed energy weapons and infrared countermeasures for use
      in
      defense and homeland security.</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">With
      the
      collaboration of our 13 senior staff level laser scientists, including ten
      Ph.D.s, we have developed multiple breakthrough technologies, with each
      representing large-scale commercial potential and when taken together constitute
      a unique and broad portfolio of intellectual property. We have a number of
      important technologies that address different issues of laser performance.
      Specifically, we believe we have technology for the industry&#8217;s&#160;highest
      brightness&#160;diode lasers for &#8220;pumping,&#8221; the highest beam quality for focus
      on a tight spot, the highest optical power density, the most robust and precise
      wavelength control, the highest efficiency, and the world&#8217;s&#160;most
      advanced&#160;technology for mid-infrared diode lasers, for homeland security
      and defense applications.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      believe we have also produced the world&#8217;s only monolithic surface emitting
      arrays, wherein we may aggregate hundreds&#160;of high power&#160;lasers onto a
      single semiconductor chip. This development is analogous to the advancement
      from
      the transistor to the integrated circuit, or from the mainframe to the personal
      computer. It allows us to reproduce lasers in high volume, assemble them
      inexpensively, and create a finished product that is easy to cool and possesses
      high power density. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      have
      designed and are developing, subject to additional funding, the world&#8217;s only
      on-chip wavelength &#8220;conversion&#8221; (shortening or lengthening wavelengths beyond
      conventional ranges for diode lasers) and control. This technology&#160;is
      capable of generating&#160;wavelengths for detecting pollution, hazardous
      materials and chemical explosives; it also is conducive to establishing
      effective countermeasures for heat-seeking missiles.&#160;We have industry
      leading eye-safe laser technology for&#160;producing a &#8220;directed energy weapons&#8221;
arsenal for the U. S. military, and for the creation of eye-safe laser products
      for surgery, hair, tattoo and acne removal, and other commercial
      applications.</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">Target
      was founded in 2000 by Dr. Jeffrey Ungar, a Caltech scientist and former head
      of
      Advanced R &amp; D at Ortel, and George Lintz, MBA an entrepreneur with fifteen
      years of investment banking and finance industry experience. Under their
      administration, QPC has built a staff of more than 26 employees, including
      prominent scientists and engineers. By 2002, we had created a state-of-the-art
      production facility that covers 18,000 square feet and allows us to conduct
      nearly all of our operations on site, including R&amp;D, semiconductor wafer
      fabrication, processing and packaging. In its present configuration, our plant
      has the capacity to produce three million devices per year and it is scalable
      to
      an estimated 20 million devices. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      the
      same year, we also produced the &#8220;first light&#8221; from our laser devices and
      procured our initial government contracts. In 2003, we phased in these
      government contracts and focused on product development for industrial, medical
      and defense purposes. In 2004, we initiated our first commercial shipments
      of
      Generation I devices and in 2005, we introduced and began to market Generation
      II products, hired worldwide sales representatives and attracted several OEM
      orders. </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">Since
      our
      inception, we have received over $2.8 million of development contracts from
      the
      United States Navy, United States Army, United States Missile Defense Agency,
      prime defense contractors in the United States and Israel. Furthermore, we
      have
      raised approximately $29.5 million in four separate rounds of equity financing.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Industry
      Overview </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By
      1954,
      physicist Charles Townes had spent $30,000 in government funds developing the
      maser, the precursor to the laser. Today, lasers constitute a multi-billion
      dollar industry. From laser surgery to CD players and grocery-store checkout
      scanners, daily living is enhanced by a basic discovery that was originally
      thought by some to have no practical uses. The diversity of laser types and
      applications continues to grow through research conducted at university,
      industrial and federal labs.</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">&#8220;LASER&#8221;
      is an acronym of light amplification by stimulated emission of radiation. A
      laser converts electricity into light and delivers a large amount of energy
      to a
      small, designated area. In general, there are three main types of commercial
      lasers: gas, solid-state and semiconductor (or &#8220;diode&#8221;). The major difference
      between a laser and any other sort of light source, such as a light bulb, is
      that a laser is focused and directed. In the case of a light bulb, there is
      a
      hot cylinder at the core and it distributes light in many different directions
      and in a range of colors, or wavelengths. Thus, light bulbs are very useful
      in
      illuminating large areas but they are essentially useless in directing energy
      to
      a small area. On the other hand, lasers are well suited to concentrating energy
      in a small area because the beam quality (a measure of how directional the
      beam
      is) is significantly higher. Furthermore, lasers produce light at essentially
      the exact desired color (wavelength) or a very closely banded range of
      colors.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><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">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </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">With
      recent advances in technology, the diode laser&#8212;our core product&#8212;is becoming
      dominant in the several markets that rely on low power lasers. In fact, in
      the
      telecommunications and optical fiber industries, diode lasers have become the
      standard and have virtually replaced all other types. However, with respect
      to
      most industrial applications, such as plastics welding, metal welding,
      soldering, surface hardening and coarse marking, gas lasers remain dominant
      because high-powered diode lasers, prior to our technology breakthroughs, have
      been unable to be focused down into a tight spot. Or in technical parlance,
      they
      lack the required &#8220;brightness.&#8221;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>The
      Gas Laser</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      gas
      laser was one of the first lasers to find practical application. Generally,
      the
      pumping mechanism is an electric discharge, although some high-power forms
      employ chemical reactions or gas compression. The helium-neon, argon-ion and
      carbon dioxide lasers are examples of gas lasers. With gas lasers, ownership
      costs are high and they are at a competitive disadvantage. They are expensive
      to
      purchase, occupy large amounts of floor space, have low efficiency
      rates&#8212;consuming approximately 100 times as much energy as they emit&#8212;and require
      vast cooling systems to handle the excess heat that is wasted in the process.
      Their principal attribute is they produce a beam of good quality, or brightness.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>The
      Solid-State Laser</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</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">This
      class of laser utilizes a transparent substance (crystalline or glass) as the
      active medium, doped to provide the energy states necessary for lasing. The
      pumping mechanism is the radiation from a powerful light source, such as a
      flash
      lamp. The ruby and Nd:YAG lasers are solid-state lasers.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">High
      power solid-state units are still expensive and large (the size of a minivan).
      They have low (but higher than gas lasers) efficiency rates in the 1 to 5%
      range, which means that only a fraction of the power used in the process is
      actually transmitted to the laser while the balance is wasted, as heat. As
      a
      result, solid-state lasers require significant cooling infrastructure.
      Solid-state lasers, as is the case with gas lasers, offer good beam quality.
      In
      addition, solid-state lasers may be made more efficient with diode pumps.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>The
      Semiconductor (or Diode) Laser</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
      category of laser converts electricity directly into light in a semiconductor
      chip without any other medium (such as gas or a crystal). The diode is designed
      to use stimulated emission to form a coherent light output. Semiconductor lasers
      are compact, affordable and highly efficient, and may be manufactured in large
      quantities. Typically, diodes successfully convert over 50% of the electric
      power source into the laser beam. Their major disadvantage is they generate
      low
      beam quality, or they lack brightness.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.4pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.4pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>The
      QPC Diode Laser</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.4pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      believe that QPC has unique high power laser diode technology platforms that
      combine high beam quality and power with high efficiencies and low cost of
      manufacture unmatched by competing laser technology. These platforms (see
&#8220;Technology Platform&#8221; section) include a &#8220;Surface Emitting Array&#8221; technology
      that permits fabrication of complete high power arrays on a single chip, novel
      processes for fabricating diodes that are intended to operate at 300% of the
      power of conventional chips without burning out, and laser diode designs that
      have ten times (10x) the&#160;brightness of conventional diode lasers. These
      technologies are protected by patents and by trade secrets, as
      appropriate.</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: 0.4pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Using
      these technologies, we are developing breakthrough Generation III direct-diode
      laser subsystems that may yield factor-of-ten improvements in size, weight,
      efficiency and cost over conventional solid-state lasers. The following table
      illustrates the commercially significant advantages that our Generation III
      (prototypes expected to be released in the fourth quarter of 2006) laser has
      over the solid state, which is embedded in the global manufacturing
      infrastructure. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.4pt" align="left"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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        </div>
      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.4pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.7pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>QPC&#8217;s
      Comparison of Gas/Solid State Lasers with Generation III QPC
      Laser*</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.7pt" align="left"><br></div>
    <div align="center">
      <table border="1" bordercolor="#000000" cellpadding="0" cellspacing="0" width="80%">

          <tr bgcolor="white">
            <td align="left" valign="top" width="20%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="24%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.7pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Gas/Solid
                State Laser</em></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font></div>
            </td>
            <td align="left" valign="bottom" width="24%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.7pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>QPC
                Direct-Diode</em></font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="20%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.7pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Power
                Output:</em></strong></font></div>
            </td>
            <td align="left" valign="top" width="24%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.7pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Two
                kilowatts</em></strong></font></div>
            </td>
            <td align="left" valign="top" width="24%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.7pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Two
                kilowatts</em></strong></font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="20%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.7pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Size:</em></strong></font></div>
            </td>
            <td align="left" valign="top" width="24%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.7pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>2.0
                cubic meters</em></strong></font></div>
            </td>
            <td align="left" valign="top" width="24%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.7pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>0.1
                cubic meters</em></strong></font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="20%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.7pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Weight:</em></strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font></div>
            </td>
            <td align="left" valign="top" width="24%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.7pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>2000
                kilograms</em></strong></font></div>
            </td>
            <td align="left" valign="top" width="24%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.7pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>less
                than 250 kilograms</em></strong></font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="20%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Power&#160;Consumption:</em></strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font></div>
            </td>
            <td align="left" valign="top" width="24%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.7pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>30
                to 60 kilowatts</em></strong></font></div>
            </td>
            <td align="left" valign="top" width="24%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.7pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>3
                to 5 kilowatts</em></strong></font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="20%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.7pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Price:</em></strong></font></div>
            </td>
            <td align="left" valign="top" width="24%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.7pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>$500,000
                to $1,000,000</em></strong></font></div>
            </td>
            <td align="left" valign="top" width="24%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.7pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>$50,000
                to $100,000</em></strong></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.7pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.4pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">*
      Based
      on preliminary prototype designs of the Generation III QPC Direct Diode
      Laser</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.4pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Product
      Offerings and Applications</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</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">Through
      our research &amp; development efforts, we believe we haved improved upon the
      disadvantages of incumbent technology: high cost of acquisition and operation,
      large size and enormous weight, inefficiency in the use of electric power,
      and
      low brightness. We intend to launch our product offerings in three distinct
      phases. Our Generation I offerings, released in 2004, are currently available
      to
      the pumping, industrial, defense and medical markets. They are designed to
      establish market presence and garner immediate revenues by being superior in
      terms of cost, reliability, efficiency and power brightness. Generation I
      products include single emitters, mounted and unmounted bars covering
      wavelengths from 800 nanometers (nm) to 1,500nm and power levels ranging from
      2.5 W (single stripe) to 50 W (25 element array). These products are currently
      in qualification at 25 customers including defense contractors, industrial laser
      system manufacturers, and medical laser manufacturers. Repeat and/or production
      quantity orders have been received from several customers. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      recently released four of our Generation II products for sale in January 2006.
      These products deploy our unique chip technology and offer enhanced brightness
      over the first generation products. Generation II products are under purchase
      orders from multiple customers including defense contractors, medical device
      companies, research institutions and industrial companies. We believe that
      our
      Generation II products include two significant advantages over other available
      diodes: (1) our non-absorbing mirror technology generates significantly higher
      power without causing catastrophic optical damage (&#8220;COD&#8221;); and (2) our internal
      gratings enable our customers to specify exact, desired wavelength within +/-
      0.5 nanometers. Internal gratings eliminate the requirement for customers to
      cool or heat their diodes to achieve a specified wavelength. We believe that
      no
      other diode manufacturer has technology that can compete with these two QPC
      advantages and we have obtained commercial and government contracts to support
      the further development of these products. </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">With
      respect to longer-term Generation III products designed to combine surface
      emitting and extreme brightness technologies, development contracts have been
      received from various areas of the United States Department of Defense. We
      are
      on schedule to release Generation III prototypes in the fourth quarter of 2006.
      With these products it is our intention to penetrate the multi-billion dollar
      solid-state and gas laser markets&#8212;particularly industrial welding&#8212;by replacing
      them with powerful and inexpensive Generation III diode solutions. In addition,
      we believe that this class of products will establish new markets in homeland
      security and defense, such as directed energy weapons, that are low cost, small,
      light, rugged and efficient. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><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">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </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"><strong>Product
      Applications </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      following are examples of applications of our laser products. All of these
      markets may be addressed by our Generation I and/or II products, except
&#8220;Materials Processing,&#8221; and certain Homeland Security applications which we
      believe will be addressed by our Generation III products. </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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Laser
      Pumping</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</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">Presently,
      the most common application of semiconductor lasers is &#8220;pumping&#8221; (or energizing)
      other lasers. In diode pumped laser architectures, the semiconductor laser
      light
&#8220;pumps&#8221; or energizes the gain medium that is configured inside its own laser
      cavity. The pump light is absorbed by the crystal or fiber, and a solid state
      or
      fiber laser is created. Diode pumping has significant advantages over
      traditional approaches that utilize lamps as pumps. In fact, nearly every
      important parameter of a laser system is improved with diode pumped
      architectures: system size, weight, performance, beam quality, waste heat
      (efficiency), complexity and cost of ownership. </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 id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Defense
      and Homeland Security</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</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">Because
      of their compact size, light weight and ruggedness, semiconductor lasers are
      ideal for military and aerospace applications. Used directly or as pumps for
      other lasers, semiconductor lasers are introduced in a wide variety of
      applications including the transmission of optical energy to a target and
      receiving a portion of it back in order to remotely measure various physical
      properties of the target. QPC&#8217;s technology is enabling diode lasers to be used
      directly in applications where traditional lasers have been an imperfect
      solution, i.e., countermeasures, target designation and laser weapons.
</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">Defense
      lasers that transmit energy to the target are common at both low and high power
      levels. On the low power end (less than 500 milliwatts), direct diode lasers
      are
      used for free-space communications for line of sight transmission. Laser
      communication is preferable to radio frequency (RF) communication because RF
      signals identify the location of the transmitter and can be easily intercepted.
      On the other hand, laser communications cannot be detected unless the
      eavesdropper is in the exact line of the laser beam, between the transmitter
      and
      the receiver, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>and</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      knows
      the exact wavelength to seek. The drawback of free-space laser communications
      is
      that fog and battlefield smoke can interfere with the signal. With QPC&#8217;s
      mid-infrared wavelength capabilities, it is possible to penetrate fog and smoke
      more than 10,000 times better than traditional near infrared wavelengths. At
      slightly higher power, direct diode lasers are used to initiate ordinances.
      For
      even higher powers and long wavelengths, diode lasers can be used directly
      (or
      through pumped solid-state lasers) to disable incoming heat-seeking missiles.
      At
      the highest power levels of 50 to 100 kilowatts, and eventually megawatts,
      high
      energy lasers for tactical weapons are being developed. The lasers can be
      deployed by land, sea and air in the years to come.</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">Another
      class of defense laser is one that is used to extract information from a target.
      At the low power end, for example, range-finding lasers allow users to measure
      distance and illuminators allow the user to view unprecedented levels of detail.
      At the higher power, remote sensing and LIDAR lasers allow the user to detect
      bio-chemical agents, clear air turbulence and other atmospheric conditions.
      Target designation lasers are used to remotely point to a target and they are
      particularly useful for non-stationary targets.</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 id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Materials
      Processing</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</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">Laser
      materials processing is one of the world&#8217;s largest laser markets, with
      applications ranging from metal cutting and welding at the high power levels,
      to
      marking and plastics welding at low powers. Diode lasers are ideal for materials
      processing because of their high efficiency and compact size compared to
      conventional gas and solid-state laser solutions. Using our high brightness
      diode lasers, a large number of applications including marking, cutting of
      non-metals and metals, and metal welding will be improved. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><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">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Medical
      Treatment</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">At
      present, a variety of medical applications utilize diode lasers as either pump
      lasers or as direct diode treatment because of their compact size, efficiency,
      low cost and ability to produce large optical energies. Hair removal, dental,
      ophthalmic and other dermatological applications utilize diode laser light
      directly. The wavelength of the light is critical to the treatment efficacy
      and
      the laser source is selected to match the absorption lines of various skin,
      blood or organ constituents, or that of an injected dye. In many cases, the
      light is delivered through a fiber by way of a catheter or scope that needs
      to
      be extremely small, resulting in the need for high brightness fiber coupled
      with
      diode lasers. </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 id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Scientific
      Research</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</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">Spectroscopy
      and atomic physics typically require that semiconductor lasers be carefully
      designed to match the wavelength, spectral width and output power requirements
      of the atom or molecule being manipulated or examined. By illuminating a sample
      with the proper wavelength of laser light, one can determine the constituents,
      deliver energy to the sample in order to induce or control chemical reactions,
      heat and or cool, and even physically manipulate the sample.</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 id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Medical
      Imaging</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Medical
      imaging is also an important emerging application of diode lasers. Traditional
      MRI technologies utilize the inherent electro-magnetic dipole associated with
      the water molecules to produce images within the human body. However, several
      organs such as the lungs and brain, are difficult to image effectively because
      of their relative lack of water. In order to dramatically enhance magnetic
      resonance imaging in these applications, diode lasers are used to produce a
      vapor that is delivered into the intended area of imaging. The inert gas does
      not react with the organ that is being imaged, but its presence allows the
      MRI
      to produce images with significantly higher resolution and contrast than an
      ordinary MRI.</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">With
      respect to other potential applications beyond medical imaging, research is
      being conducted to use technology advances to evaluate the structural integrity
      of bridges and buildings, and in searching for oil. </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 id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Printing,
      Graphic Arts &amp; Display</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</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">High
      power semiconductor lasers are used in the printing process for a wide variety
      of print media including magazines, posters and newspapers. The most common
      application is thermal computer-to-plate imaging in which diode lasers are
      used
      to write printing plates. Our high brightness semiconductor laser technology
      is
      also creating a broader range of printing applications such as flexography
      and
      eventually on-press imaging.</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">Thermal
      computer-to-plate imaging has significant advantages over traditional analog
      film and plate technology, both of which use UV lamps. The elimination of film
      from the workflow dramatically reduces the start-up time for printers and allows
      them more flexibility in getting jobs on and off the press. Additionally, the
      thermal computer-to-plate process allows the user to work in white light, versus
      a dark environment. Printing quality is generally improved and costs are reduced
      by the removal of the image setter, processor, stripper, etc.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Furthermore,
      in the area of digital light projection (or display), we believe the sizeable
      home theater and rear projection markets will migrate toward laser light sources
      for longer life, more efficient use of electrical power and sharper
      images.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Commercial
      Laser Markets</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      estimate that the global laser market is greater than $5 billion in annual
      revenues. Lower margin, commodity diodes (optical storage and
      telecommunications) represent over 50% of the market, and we do not consider
      this sector economically attractive. The remaining, higher margin marketplace,
      which is where we are positioned, is comprised of non-diode lasers and high
      power diodes. In the future, we believe that emerging applications, including
      defense and display, will increase the overall size of the market. Market sizes
      in this section are primarily derived from </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Laser
      Focus World</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      January
      2005 and February 2005 issues, and secondarily from market participant
      inquiries. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><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">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </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"><strong>Target
      Markets </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">QPC&#8217;s
      higher-margin target markets include the $2 billion non-diode segment, the
      $220
      million high power diode segment, and the emerging markets (defense and display)
      that we anticipate will each grow in size to more than $1 billion over the
      next
      several years. Today, the $2 billion industrial high power laser market is
      segmented as follows: materials processing ($1 billion), medical ($400 million),
      semiconductor ($312 million), scientific/research ($150 million),
      instrumentation/biotech (greater than $80 million), and printing ($40
      million).</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">Even
      though diode lasers are more affordable, compact and efficient, they have
      experienced only a 10% penetration rate of the industrial market. This
      historically low adoption rate is related to the poor beam quality associated
      with diode lasers. We believe that, with our superior diode laser product,
      which
      has better beam quality than other commercially available diode and non-diode
      lasers, we will be able to gain market share vis-&#224;-vis our
      competitors.</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">Materials
      processing (welding, cutting, drilling, heat treatment, marking) is a large,
      $1
      billion addressable market. Diodes have only reached a fraction of the market
      with $5 million in sales (for direct diode applications; and somewhat more
      through pumping, or indirect applications). In the $400 million medical area
      (ophthalmology, therapeutic, dermatology, dental), diode sales are approximately
      $60 million. One near-term opportunity for us is in the area of laser hair
      removal and skin treatment, particularly tattoo removal and acne treatment.
      Procter &amp; Gamble, Gillette and Johnson &amp; Johnson intend to make laser
      consumer products and QPC believes it is positioned, because of its capabilities
      at eye-safe wavelengths, to be a laser supplier to these consumer giants.
      Another immediate market opportunity is in the treatment of varicose veins
      where
      a major medical system manufacturer already considers QPC to be the preferred
      manufacturer for its laser diodes.</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">With
      respect to $312 million of semiconductor applications (lithography, via
      drilling, inspection/defect analysis and repair), diodes have experienced zero
      penetration. In science/research ($150 million) and instrumentation/biotech
      (approximately $75 million in sales for DNA sequencing, microscopy, flow
      cytometery), diode lasers have negligible market share. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Diode
      lasers have been more successful in penetrating the $40 million printing and
      reprographics field (computer-to-plate for magazines, newspapers,
      photofinishing) with approximately 50% market share. Companies using large
      volumes of diode lasers on a large-scale basis are Kodak (through its recent
      acquisition of CREO), Heidelberg, Agfa and Dainippon Screen. QPC&#8217;s designs bring
      the cost of diodes down to one tenth of the prevailing industry cost. Finally,
      in the area of diode pumping of (solid state and fiber) lasers, which is a
      $115
      million market, diodes have 100% market share.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      the
      future, we intend to address what we consider to be attractive emerging markets,
      those of defense and display, both of which we estimate will become billion
      dollar niches. Defense applications include high-energy lasers for directed
      energy weapons, countermeasures for heat seeking missiles, target designation,
      remote sensing/LIDAR (light detection and ranging), ordinance initiation,
      illumination and display. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Department of Homeland Security has earmarked $120 million for the testing
      of
      laser countermeasures and has been directed by Congress to move rapidly to
      adapt
      military technology to approximately 7,000 commercial jets in the U. S. alone.
      According to a recent study by Congress, more than 350,000 shoulder-fired
      missiles exist in government arsenals throughout the world. Unfortunately,
      not
      all of these missiles are properly accounted for and they are subject to black
      market trafficking. In the face of this potential threat, the Department of
      Homeland Security has mandated that commercial jets be equipped with laser
      systems to confuse heat-seeking missiles. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><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">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">8</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </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">A
      Rand
      Corporation study estimates that using current technology&#8212;diode pumped YAG
      systems with frequency conversions&#8212;it would cost $1.6 million to equip each
      aircraft with these defensive capabilities. Besides the total cost of $11
      billion for such a project, YAG lasers are bulky, inefficient, expensive, and
      sensitive and require frequent, critical adjustments. Over time, Northrop
      Grumman estimates that it will be possible to bring the cost per aircraft down
      to the $1 million level. We believe that this cost could be reduced below $1
      million using QPC&#8217;s mid-Infrared, or mid-IR, technology, which is small,
      compact, durable and easily manufactured. With the cost of the laser
      representing roughly one half of the entire system&#8217;s price tag, this project
      area is a compelling target 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 style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Another
      attractive market opportunity lies in the directed energy weapons (&#8220;DEWs&#8221;)
      field, wherein laser weapons are expected to replace more traditional ordinance.
      We estimate that 2,000 to 10,000 DEWs will be deployed and that the cost (of
      the
      laser portion of each system) will be approximately $1 million. This translates
      into an addressable market with a potential of $2 billion to $10 billion and
      we
      have received DOD funding to develop this capability. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      2005,
      annual diode laser sales for defense purposes were only in the $15 million
      range, worldwide. Another promising field is display (laser television, laser
      theatre, boardroom projection, micro-display for laptops and telephones) and
      QPC
      intends to pursue its technology advantages to develop the potential of this
      sector. The home theater market is evolving toward laser light sources for
      longer life, more efficient use of electrical power and sharper images. The
      major participants in this area are Sony, Samsung and Texas Instruments,
      according to U. S. Display Consortium. While there is no current market for
      laser projection television sets because the technology has not been released,
      we believe that our technology will enable us to replace a significant portion
      of the multi-billion dollar rear projection television market will migrate
      toward laser light sources for longer life, more efficient use of electrical
      power and sharper images.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Competition</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Other
      companies design and manufacture surface emitting lasers but they are lower
      powered, lower performance and generate lower yields. These manufacturers can
      produce individual laser diodes that work well but they cannot produce a chip
      with 10, 20 or 50 laser diodes, all of which are operating on high power and
      generating high yields. In addition, competitors offer traditional architecture
      for making surface emitting lasers at a fraction of a watt (milliwatts or
      microwatts) versus QPC&#8217;s chips that produce hundreds of watts.</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">Management
      believes that our competitors who are working on improving diode technology
      are
      using traditional designs and trying to enhance laser performance with
      technology that is decades old. On the other hand, we have developed completely
      new technology platforms that produce much higher performance at lower costs.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">QPC
      is
      beginning to compete against large companies such as </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Coherent
      and Spectra Physics</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;
      and smaller entities such as </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">nLight
      Photonics and Alfalight</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      However, we believe that while each competitor offers some commercially
      attractive features, there is no other company that offers the same range and
      completeness of features.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      following table highlights our standing with three categories of
      competitors:</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 border="1" bordercolor="black" cellpadding="0" cellspacing="0" width="100%">

          <tr bgcolor="white">
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>High
                Brightness/ Diode Laser</strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Capability</strong></font></div>
            </td>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>High
                Power 2D arrays</strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Patents,
                Capability</strong></font></div>
            </td>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Mid-IR
                laser diodes</strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Patents,
                Capability</strong></font></div>
            </td>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Wafer
                </strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Fabrication
                Capability</strong></font></div>
            </td>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Personnel
                experienced in high volume chip production</strong></font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="middle" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>QPC</strong></font></div>
            </td>
            <td align="left" valign="middle" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Yes</strong></font></div>
            </td>
            <td align="left" valign="middle" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Yes</strong></font></div>
            </td>
            <td align="left" valign="middle" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Yes</strong></font></div>
            </td>
            <td align="left" valign="middle" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Yes</strong></font></div>
            </td>
            <td align="left" valign="middle" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Yes</strong></font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="middle" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Larger
                competitors</strong></font></div>
            </td>
            <td align="left" valign="middle" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>No</strong></font></div>
            </td>
            <td align="left" valign="middle" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>No</strong></font></div>
            </td>
            <td align="left" valign="middle" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>No</strong></font></div>
            </td>
            <td align="left" valign="middle" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Yes</strong></font></div>
            </td>
            <td align="left" valign="middle" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Yes</strong></font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="middle" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Packager
                competitors</strong></font></div>
            </td>
            <td align="left" valign="middle" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>No</strong></font></div>
            </td>
            <td align="left" valign="middle" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>No</strong></font></div>
            </td>
            <td align="left" valign="middle" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>No</strong></font></div>
            </td>
            <td align="left" valign="middle" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>No</strong></font></div>
            </td>
            <td align="left" valign="middle" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Yes</strong></font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="middle" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Epi-growth
                competitors</strong></font></div>
            </td>
            <td align="left" valign="middle" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>No</strong></font></div>
            </td>
            <td align="left" valign="middle" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>No</strong></font></div>
            </td>
            <td align="left" valign="middle" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>No</strong></font></div>
            </td>
            <td align="left" valign="middle" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Yes</strong></font></div>
            </td>
            <td align="left" valign="middle" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>No</strong></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 id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </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">Several
      types of manufacturers participate today in the $200 million high power diode
      laser market. &#160;Large manufacturers are typically vertically integrated with
      high volume semiconductor wafer fabrication capability, but these competitors
      do
      not have advanced technologies and patents for high brightness devices, high
      power, low cost surface emitting arrays, or mid-infrared devices. &#160;Another
      type of competitor, which we call a &#8220;packaging competitor,&#8221; focuses on high
      volume packaging only but lacks wafer fabrication capability or advanced
      technologies and patents. &#160; Their inability to fabricate wafers combined
      with their lack of advanced technology makes it difficult for them to innovate
      new designs and products. A third type of competitor, which we call an
&#8220;Epi-growth (short for epitaxial) competitor&#8221;, has low volume wafer fabrication
      capability left over from the telecom era, but lacks advanced technologies
      and
      patents.&#160; In general, we believe that QPC is the only laser company with
      wafer fabrication capabilities, high volume experience, and advanced
      technologies and patents for high brightness devices, high power low cost
      surface emitting arrays, and mid-infrared devices. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Technology
      Platform</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      have a
      variety of technologies that we believe are superior to conventional
      semiconductor-based lasers. To our knowledge, we have technology to produce
      the
      industry&#8217;s most powerful and bright diode lasers for solid-state laser
&#8220;pumping&#8221;, semiconductor laser arrays with the industry&#8217;s highest spectral and
      spatial brightness, semiconductor lasers with the most robust and effective
      wavelength control, and the most promising technology for mid-infrared diode
      lasers for possible use in homeland security and defense.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      have
      manufactured arrays of laser diodes in which each diode has brightness exceeding
      conventional arrays by ten times (10x) or more. The high brightness of these
      arrays allows them to be used in applications such as direct diode materials
      processing, fiber-core laser pumping or red-green-blue displays that cannot
      use
      conventional laser diodes or arrays.</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">Our
      surface emitting array technology is a significant achievement in low cost
      laser
      manufacturing because for the first time </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>a
      complete two-dimensional high power&#160;array can be produced on a single wafer
      and packaged on a single cooler.</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      By
      contrast, conventional laser array technologies require individual manufacture,
      assembly and testing of each row of an array. Our surface emitting technology,
      which was developed with funding from the U.S. Navy represents a ten times
      (10x)
      decrease in the number of laser chips and coolers required. This technology
      also
      represents a breakthrough in reliability, because it eliminates the need for
      &#8220;micro-channel&#8221; coolers that are a leading cause of laser burnout.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      have
      developed high power lasers with </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>on-chip,
      monolithic wavelength control.</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      These
      lasers are used for pumping solid-state lasers as well as other applications,
      and have important advantages over conventional lasers including efficient
      absorption by the solid-state crystal, and three times (3x) lower temperature
      sensitivity of wavelength. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      have
      also developed high power long-wavelength arrays for pumping </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>eye-safe</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      lasers.
      These are lasers that emit beams that we estimate are nearly a million times
      less hazardous to the eye than conventional lasers, and are very important
      for
      industrial and military lasers in order to reduce the risk of collateral
      casualties. We have developed eye-safe laser arrays with industry leading
      performance, and are pursuing, a new class of advanced high performance
      wavelength stabilized arrays for eye-safe lasers. We believe that the U.S.
      Army,
      Navy and Air Force are actively pursuing the development of military lasers.
      As
      laser powers continue to increase, we believe the advantages offered by our
      surface-emitting and eye-safe technologies will become even more
      compelling.</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">Laser
      sources in the mid-infrared range may be of crucial importance for homeland
      defense against terrorism. They can be used to confuse heat-seeking missiles
      that might be used to attack airliners and also for early warning of biological
      and chemical attacks. At present, available sources of mid-infrared laser light
      are too expensive and delicate for commercial aviation. We have performed an
      early-stage demonstration of a novel technology for shifting the output of
      a
      laser diode into the mid-infrared wavelength range. This should enable us to
      provide compact, high performance mid-infrared laser diodes at very low cost
      of
      manufacture.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><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">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </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"><strong>Sales
      and Marketing Plan</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      the
      United States, we have a sales team that sells directly to our customers. In
      foreign markets, we use distributors to sell our products, and we have existing
      relationships in France, Italy, Germany, the United Kingdom, Israel, China
      and
      Japan. On a global basis, we employ various outside consultants to gain access
      to new accounts. Our in-house sales team currently consists of a Senior Vice
      President of Sales and Marketing, a Director of Worldwide Marketing, a North
      American Sales Manager, and a sales administrator. </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">Our
      marketing activities include advertising in several international trade journals
      and we have published articles in many magazines. Our scientists have presented
      several technical papers at military and general laser conferences. We also
      exhibit at more than five trade shows on an annual basis. In addition, we use
      an
      outside agency for graphic arts and marketing communications.</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">Our
      advertisements and website are currently producing an average of one new inquiry
      per day. We manage the inquiries by parceling them into 1) standard products;
      2)
      custom inquiries from desirable OEM target customers for products on our
      roadmap; and 3) other. Our general policy is to decline to quote on inquiries
      that do not fall within the first two categories.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Patents,
      Trademarks and Intellectual Property</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      have
      been granted three patents and have 13 patents pending. These patents cover
      a
      suite of different technologies and are related to process (manufacturing),
      performance characteristics and design. We have applied for patents in our
      key
      markets of North America, Asia and Europe, and have been granted trade secret
      protection, where appropriate. We also believe that due to the complex nature
      of
      our products, they would be very difficult to reverse engineer and replicate
      with precision. </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">From
      time
      to time, we may encounter disputes over rights and obligations concerning
      intellectual property. Also, the efforts we have taken to protect our
      proprietary rights may not be sufficient or effective. Any significant
      impairment of our intellectual property rights could harm our business, our
      reputation, or our ability to compete. Also, protecting our intellectual
      property rights could be costly and time consuming. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      granted Finisar a non-exclusive license to all of our existing and future
      intellectual property rights. Finisar has no right to grant sub-licenses (except
      to end users) or assign its rights prior to September 2006. We may pay Finisar
      a
      forbearance fee of up to $1,500,000 (to be credited against the Termination
      Fee
      described hereinafter), to extend the restriction on sub-licensing or assignment
      by Finisar until September 2008. We may extinguish this license by paying
      Finisar a Termination Fee of $5,000,000 at any time prior to September 2006,
      $5,500,000 from September 2006 through September 2007 or $6,000,000 from
      September 2007 until September 2008. In addition, we granted Finisar most
      favored nation pricing assurances with respect to all Company
      products.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Research
      &amp; Development</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      currently conduct research and early stage development activities in-house.
      We
      retain title rights to all improvements or enhancements to our technology
      developed by or worked on by the outside laboratory. Mr. Ungar, our chief
      executive officer, is responsible for development of new product concepts.
      We
      have purchased materials and components for our products under development
      from
      a number of technology companies. We continue research on our Generation III
      technologies and other new concepts. We spent approximately $4.8 million for
      research and development in 2005 and $3.5 million in 2004. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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        </div>
      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </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"><strong>Manufacturing</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">One
      of
      our core strategies is to tightly control our manufacturing process. We believe
      this is essential in order to maintain high quality products and enable rapid
      development and deployment of new products and technologies. We design and
      produce many of our own components and sub-assemblies in order to retain quality
      control. All of our manufacturing will be conducted at our Sylmar, California
      headquarters. We use contract manufacturing firms for certain specialized
      packaging functions. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Raw
      materials or sub-components required in the manufacturing process are generally
      available from several sources. However, any interruption or delay in the supply
      of any of these components or materials, or the inability to obtain these
      components and materials from alternate sources at acceptable prices and within
      a reasonable amount of time, would impair our ability to meet scheduled product
      deliveries to our customers and could cause customers to cancel
      orders.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; 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
      rely
      exclusively on our own production capability to manufacture certain strategic
      components, optics and optical systems, semiconductor lasers, lasers and
      laser-based systems. Because we manufacture, package and test these components,
      products and systems at our own facilities, and such items may not be readily
      available from other sources, any interruption in our manufacturing would
      adversely affect 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 style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.4pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Customers</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <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">For
        the
        years ended December 31, 2005 and 2004&#160;we had three and two major
        customers, respectively, whose revenue volume comprised approximately 61%
        and
        94%, respectively, of our total revenue. Total government contract revenue
        during the years ended December 31, 2005 and 2004 was approximately 45% and
        94%,
        respectively. As of December 31, 2005 the amounts due from government contracts
        was $15,669 and is included in accounts receivable in the accompanying financial
        statements. </font></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"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Governmental
      Regulations </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      operations are subject to various federal, state and local environmental
      protection regulations governing the use, storage, handling and disposal of
      hazardous materials, chemicals, various radioactive materials and certain waste
      products. In the United States, we are subject to the federal regulation and
      control of the Environmental Protection Agency. We are further subject to
      regulation by the Los Angeles Fire Department and the South Coast Air Quality
      Management Department. Comparable authorities are involved in other countries
      and jurisdictions. We believe that compliance with federal, state and local
      environmental protection regulations will not have a material adverse effect
      on
      our capital expenditures, earnings and competitive and financial
      position.</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">Although
      we believe that our safety procedures for using, handling, storing and disposing
      of such materials comply with the standards required by federal and state laws
      and regulations, we cannot completely eliminate the risk of accidental
      contamination or injury from these materials. In the event of such an accident
      involving such materials, we could be liable for damages and such liability
      could exceed the amount of our liability insurance coverage and the resources
      of
      our business.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Legal
      Proceedings</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      are
      not a party to any pending legal proceedings that, if decided adversely to
      us,
      would have a material adverse effect upon our business, results of operations
      or
      financial condition and are not aware of any threatened or contemplated
      proceeding by any governmental authority against our company. To our knowledge,
      we are not a party to any pending civil or criminal action or investigation.
      </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: 0.4pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Facilities</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      principal executive offices and manufacturing facilities are currently located
      at 15632 Roxford Street, Sylmar, California 91342 with a lease term of ten
      years
      and an option to extend at market rates for an additional five years of 40,320
      square feet, and expiration on May 31, 2016 for the initial term and May 31,
      2021 for the option. We use 18,000 square feet of our leased 40,320 square
      foot
      building and sub-let the remainder of our facility for warehousing space. We
      pay
      approximately $25,500 per month for lease payments and approximately $1,800
      per
      month for common area maintenance and recover $5,000 from our subleases, all
      on
      a month-to-month basis. </font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Employees
      </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      have
      28 full-time and two part-time employees. In addition, we use two full-time
      contractors and two other contractors on an occasional basis. We have 14
      employees in R&amp;D/Engineering, four in sales &amp; marketing, and five in
      general &amp; administration. No employee is represented by a labor union, and
      we have never suffered an interruption of business caused by labor disputes.
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</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: 10pt; FONT-FAMILY: Times New Roman"><strong><u>MANAGEMENT&#8217;S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION </u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Background
      &amp; Financing History</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      were
      incorporated in November 2000 by Jeffrey Ungar, Ph.D. and George Lintz, MBA
      (our
&#8220;Founders&#8221;). The Founders began as entrepreneurs in residence with DynaFund
      Ventures in Torrance, California and wrote the original business plan during
      their tenure at DynaFund Ventures from November 2000 to January 2001. The
      business plan drew on Dr. Ungar&#8217;s 17 years of experience in designing and
      manufacturing semiconductor lasers and Mr. Lintz&#8217;s 15 years of experience in
      finance and business; the primary objective was to build a state of the art
      wafer fabrication facility and hire a team of experts in the field of
      semiconductor laser design. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      secured our first round of equity financing in August 2001, led by Finisar
      Corporation (NASDAQ: FNSR), a telecommunications component manufacturer,
      headquartered in Sunnyvale, California. Finisar invested $5 million and DynaFund
      Ventures invested $2 million in our preferred stock. Other investors, including
      small funds and individuals, invested $2.03 million in the first round of
      financing. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      addition to Finisar&#8217;s equity investment, they made a five-year term loan to us
      for $7 million, closing in two tranches between August 2001 and January 2002.
      The total investment of Finisar was $12 million including the preferred equity
      and debt. The total equity and debt capital invested in our company, as of
      January 2002, was $16 million. </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">With
      the
      proceeds of the initial financings, the Founders recruited three scientists
      who
      had previously worked for Dr. Ungar to form the core of our chip design team.
      We
      entered into a lease on an industrial building in Sylmar, California, and
      proceeded to customize the facility, outfitting it with a unique set of
      semiconductor growth and processing equipment. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      founders and initial investors believed that the potential laser diode
      technology that could be developed would be robust and our success would not
      be
      dependent on a single market. Our originally targeted market was fiber optic
      telecommunications. As it became clear within the first two years of operations
      that the telecommunication market was experiencing a slump, we investigated
      numerous markets that could benefit from our laser diode technology. The
      Founders and the Board of Directors selected high power laser manufacturing
      for
      applications in the materials processing industry because of its mature market
      size of over one billion dollars per year. Our market research determined that
      we would have compelling competitive advantages in the materials processing
      market and that the burgeoning defense/homeland security laser market had
      significant areas of technology overlap with the industrial materials processing
      market. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      the
      first calendar quarter of 2003, we decided on a course to: (a) pursue the
      materials processing and defense/homeland securities market as long term target
      markets (with development of our Generation III products); (b) initiate a market
      presence by offering Generation I products which are in &#8220;form, fit and function&#8221;
the same as other available products, but with higher reliability; (c) develop
      Generation II products which are form and fit the same as other available
      products, but with </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>much
      higher functionality</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">;
      and (d)
      use U.S. Government development funds to subsidize the development of our
      commercial products. We released our Generation I products in the second quarter
      of 2004 and are releasing our Generation II products in the fourth quarter
      of
      2005. Generation III products are expected to be released in the fourth quarter
      of 2006. Generation I products have been sold to customers in the medical,
      printing and solid state pumping industries. </font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      have
      used government development funds to subsidize product development. We were
      awarded four Phase I &#8220;Small Business Innovation Research&#8221; contracts and three of
      them have progressed to Phase II contracts.. Recently, we were selected as
      a
      sub-contractor as part of a team working on a project for the Defense Advance
      Research Project Agency (&#8220;DARPA&#8221;). Our portion of the DARPA contract is $3.1
      million to be carried out in two phases over three years. This contract will
      fund development of the early stages of semiconductor lasers to be used for
      Directed Energy Weapons; and the project overlaps with our development of lasers
      for the industrial materials processing market. In addition to U.S. Government
      funds, we have received development funds from U.S. prime defense contractors
      as
      well as a major foreign military contractor. The funds that we have received
      and
      expect to receive are for development that overlaps almost entirely with our
      commercial development. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      the
      third quarter of 2003, we raised a second round of equity financing. Finisar
      converted the $5 million remaining principal balance on their term loan into
      our
      Series B Preferred Stock and we raised an additional $2.8 million in new cash.
      Three of the five members of the Board of Directors at that time, founders
      Dr.
      Ungar and Mr. Lintz and independent director, Dr. Israel Ury, each purchased
      preferred stock in the Series B round of financing. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      the
      second quarter of 2004, we entered into a senior secured two-year note
      transaction with various investors and raised $3.25 million. In the second
      quarter of 2005, approximately $2.1 million of the $2.4 million outstanding
      balance was extended for an additional year. The largest participant in the
      note
      transaction, investing $2.5 million, was Envision Partners of which QPC&#8217;s Chief
      Financial Officer, Mr. Lintz, is a 50% partner. </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">From
      the
      fourth quarter of 2004 through the first quarter of 2005, we raised $5.9 million
      in a third round of equity financing. Investors who participated in this round
      were approximately sixty high net worth individuals. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      third
      quarter 2005, we raised $215,500 through a sale of our common stock to eight
      high net worth individuals.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      November 2005, we raised $500,000 pursuant to a 10% secured note financing
      with
      Jeffrey Ungar, our Chief Executive Officer, and George Lintz, our Chief
      Financial Officer. Pursuant to these bridge notes, we issued these lenders
      warrants to purchase 320,000 shares of common stock at $1.25 per share (&#8220;Bridge
      Warrants&#8221;). In connection with extensions of the maturity date of these bridge
      notes from January 2006 to April 2006, we granted 900,000 additional Bridge
      Warrants to these lenders. The bridge notes were paid in full as of April 25,
      2006. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="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
      January 2006, through a private placement offering, we raised $2,877,750 from
      the sale of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">570,550
      units of our securities, each unit consisting of four shares of common stock
      and
      one warrant to purchase one share of common stock at $1.50 per share (for a
      total of 2,302,200 shares of common stock and 570,550 warrants). </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">Since
      February 2006, we closed on an additional 3,370,000 shares of common stock
      at a
      $1.25 per share for $4,212,500.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</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: 10pt; FONT-FAMILY: Times New Roman"><strong>CRITICAL
        ACCOUNTING POLICIES AND ESTIMATES</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
        discussion and analysis of our financial condition and results of operations
        are
        based on our consolidated financial statements, which have been prepared
        in
        accordance with accounting principles generally accepted in the U.S. The
        preparation of these financial statements requires us to make estimates and
        judgments that affect the reported amounts of assets, liabilities, revenues
        and
        expenses for each period. The following represents a summary of our critical
        accounting policies, defined as those policies that we believe are the most
        important to the portrayal of our financial condition and results of operations
        and that require management's most difficult, subjective or complex judgments,
        often as a result of the need to make estimates about the effects of matters
        that are inherently uncertain. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Impairment
        of Long-Lived Assets</u></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 63pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
        January 1, 2002, the Company adopted the provisions of SFAS No. 144,
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>&#8220;Accounting
        for the Impairment or Disposal of Long-Lived Assets.&#8221;</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        SFAS No.
        144 addresses financial accounting and reporting for the disposal of long-lived
        assets and supersedes SFAS No. 121, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>&#8220;Accounting
        for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
        of.</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
The
        adoption of this statement did not have a material effect on the Company&#8217;s
        results of operations or financial condition.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Revenue
        Recognition </u></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        majority of the Company&#8217;s revenues result from fixed-price contracts with U.S.
        government agencies. Revenues from fixed-price contracts are recognized under
        the percentage-of-completion method of accounting, generally based on costs
        incurred as a percentage of total estimated costs of individual contracts
        (&#8220;cost-to-cost method&#8221;). Revisions in contract revenue and cost estimates are
        reflected in the accounting period as they are identified. Provisions for
        the
        entire amount of estimated losses on uncompleted contracts are made in the
        period such losses are identified. No contracts were determined to be in
        an
        overall loss position at December 31, 2005. At December 31, 2005, there was
        no
        deferred revenue and approximately $10,774 of unbilled receivable related
        to
        these government contracts. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company recognizes revenues on product sales, other than fixed-price contracts
        after shipment of the product to the customer and formal acceptance by the
        customer has been received. Depending upon the specific agreement with the
        customer, such acceptance normally occurs subsequent to one or more of the
        following events: receipt of the product by the customer, installation of
        the
        product by the customer.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 72pt; 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">Accounts
        receivable are reviewed for collectibility. When management determines a
        potential collection problem, a reserve will be established, based on
        management&#8217;s estimate of the potential bad debt. When management abandons all
        collection efforts it will directly write off the account and adjust the
        reserve
        accordingly.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 63pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Management
        Estimates</u></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States of America requires management to
        make
        estimates and assumptions that affect the reported amounts of assets 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>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Sales
      &amp; Product Releases</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">QPC
      signed its first government development contract in the second quarter of 2002
      and we shipped our first commercial product in the second quarter of 2004.
      We
      hired our first salesman in the fourth quarter of 2003, added a Director of
      Worldwide Sales in the third quarter of 2004 and a Senior Vice President of
      Marketing &amp; Sales in the second quarter of 2005. Our Marketing and Sales
      Department is headed by Dr. Paul Rudy; he was recruited from a Director of
      Marketing position at Coherent Inc., the world&#8217;s largest publicly traded laser
      company. Dr. Rudy&#8217;s Ph.D. in physics and his eight years of sales and marketing
      experience uniquely qualified him to become head of sales and marketing. QPC&#8217;s
      Sales Department currently has three full time personnel and a network of
      worldwide representatives and distributors. We currently have 25 customers.
      We
      are still in the qualification stage of the sales cycle with most of these
      customers. However, several customers have made repeat orders and one customer
      ordered and received production quantity and made repeat orders. We expect
      many
      of the customers in the qualification phase to turn into production quantity
      customers in 2006. We have received &#8220;Non-recurring Engineering&#8221; funds, or &#8220;NRE&#8221;
from several customers to develop custom products for them using our proprietary
      technology. In addition to the customers from whom we have received purchase
      orders, we currently receive approximately one inquiry per day from new
      potential customers, and we have more than $20 million per annum of
      opportunities in-house for which we are at various stages of presentation and
      proposal. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; 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
      sales grew from $89,161 in 2002; to $229,079 in 2003; to $1,062,133 in 2004
      to
      $1,073,091 in 2005. There were no &#8220;commercial&#8221; sales in 2002 and 2003, as all
      revenue was derived from government contracts. Commercial sales, which were
      initiated in 2004, contributed $75,002 to the total for the year. Calendar
      year
      2005 was a transitional year for QPC sales for two primary reasons: (1)
      commercial sales contributed 55% of the total sales for the year (up from less
      than 10% in 2004); and (2) while absolute sales were approximately the same
      in
      2005 as 2004, total backlog&#160;by January&#160;2006 was approximately ten
      times greater than total backlog at the end of 2004.&#160; Bookings shippable
      within 12 months at the end of 2004 were approximately $700,000
      and&#160;$1,062,000&#160;at the end of 2005. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</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: 10pt; FONT-FAMILY: Times New Roman"><strong>YEAR
        ENDED DECEMBER 31, 2005 COMPARED TO THE YEAR ENDED DECEMBER 31, 2004.
</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">REVENUE.
        During the year ended December 31, 2005, QPC had revenue of $1,073,191 as
        compared to revenues of $1,050,816 during the year ended December 31, 2004,
        an
        increase of approximately 2%. This increase is attributable to growing our
        sales
        and marketing organization. We believe that our sales will continue to grow
        because we are strengthening our sales force and more new products will be
        launched. Additionally, we have existing contracts with scheduled shipments
        for
        2006 which will cause our revenue to grow in 2006 without any additional
        sales
        or product releases, assuming we produce and ship according to our commitments.
        </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">COST
        OF
        REVENUE. Cost of revenue, which consist of direct labor, overhead and material
        costs, were $1,009,477 for the year ended December 31, 2005 as compared to
        $786,605 for the year ended December 31, 2004. This increase is attributable
        to
        a new mix of products that initially have a higher cost of labor and materials.
        We expect the gross profit to increase on our existing products as we continue
        to produce and ship them.</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">GROSS
        PROFIT. Gross profit was $63,714 for the year ended December 31, 2005 as
        compared to $264,211 for the year ended December 31, 2004, representing gross
        margins of approximately&#160;6% and 25%, respectively. The decrease in our
        gross profits is attributable to a new mix of producs that initially has
        a
        higher cost of labor and materials. QPC&#8217;s management believes that in 2006,
        sales will increase while gross margin will increase as a result of increased
        efficiencies in our operations and higher volume production orders.</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">RESEARCH
        AND DEVELOPMENT COSTS. Research and development costs which consist of salaries,
        professional and technical support fees, material and overhead, totaled
        $4,753,356 for the year ended December 31, 2005, as compared to $3,451,538
        for
        the year ended December 31, 2004, an increase of approximately 38%.
</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">GENERAL
        AND ADMINISTRATIVE EXPENSES. General and administrative expenses totaled
        $2,896,875 for the year ended December 31, 2005, as compared to $2,056,516
        for
        the year ended December 31, 2004, an increase of approximately 41%. This
        increase is primarily attributable to the expansion of our marketing, sales
        and
        operations; and the reallocation of personnel and resources from research
        and
        development to manufacturing. At this point, manufacturing overhead is grossly
        underutilized. </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">NET
        LOSS.
        QPC had a net loss of $7,777,858 for the year ended December 31, 2005 as
        compared to $5,339,419 for the year ended December 31, 2004. The increase
        in net
        loss is attributable to growing our sales and marketing department, increased
        research and development activities,&#160;and ramping up operations for higher
        volume production. QPC management believes that net loss will decrease as
        we
        introduce new products and increase sales. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</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"><strong>Liquidity
      and Capital Resources</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">QPC
      lost
      $5.3 million in 2004 and lost $7.8 million in 2005. We currently have negative
      cash flow of approximately $600,000 per month. As QPC plans to increase its
      revenue in 2006 and 2007, we expect to decrease the negative cash flow and
      turn
      to cash flow positive. Current resources and sales projections require us to
      raise an estimated $5 million of additional</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">capital.
      We raised $2.9 million through an equity offering that ended in January 2006
      and
      $4.5 million so far in a second equity offering. Depending on how much money
      we
      raise in this second equity offering, market conditions, and cash needs, we
      may
      raise additional capital in the twelve months by means of a private placement
      or
      other financing vehicle. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      addition to raising capital through private placements, we are exploring the
      possibility of engaging a corporate investor whose business areas can
      potentially leverage QPC&#8217;s technology and products. A strategic investor may be
      granted a favorable business arrangement, such as an exclusive license in a
      certain area of business as an inducement to make an investment in QPC. We
      believe that there are potential strategic investors who could leverage QPC&#8217;s
      technology to increase their own sales and contracts to much larger volumes
      than
      QPC could attain directly in the near to intermediate term. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</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: 10pt; FONT-FAMILY: Times New Roman"><strong>RECENT
        ACCOUNTING PRONOUNCEMENTS</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><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
        November 2004, the FASB issued SFAS No. 151, &#8220;Inventory Costs, an amendment of
        ARB No. 43, Chapter 4&#8221;. The amendments made by Statement 151 clarify that
        abnormal amounts of idle facility expense, freight, handling costs, and wasted
        materials (spoilage) should be recognized as current period charges and require
        the allocation of fixed production overheads to inventory based on the normal
        capacity of the production facilities. The guidance is effective for inventory
        costs incurred during fiscal years beginning after June 15, 2005. Earlier
        application is permitted for inventory costs incurred during fiscal years
        beginning after November 23, 2004. The Company has evaluated the impact of
        the
        adoption of SFAS 151, and does not believe the impact will be significant
        to the
        Company's overall results of operations or financial position.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        December 2004, the FASB issued SFAS No.153, &#8220;Exchanges of Nonmonetary Assets, an
        amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions.&#8221; The
        amendments made by Statement 153 are based on the principle that exchanges
        of
        nonmonetary assets should be measured based on the fair value of the assets
        exchanged. Further, the amendments eliminate the narrow exception for
        nonmonetary exchanges of similar productive assets and replace it with a
        broader
        exception for exchanges of nonmonetary assets that do not have commercial
        substance. Previously, Opinion 29 required that the accounting for an exchange
        of a productive asset for a similar productive asset or an equivalent interest
        in the same or similar productive asset should be based on the recorded amount
        of the asset relinquished. Opinion 29 provided an exception to its basic
        measurement principle (fair value) for exchanges of similar productive assets.
        The Board believes that exception required that some nonmonetary exchanges,
        although commercially substantive, be recorded on a carryover basis. By focusing
        the exception on exchanges that lack commercial substance, the Board believes
        this Statement produces financial reporting that more faithfully represents
        the
        economics of the transactions. The Statement is effective for nonmonetary
        asset
        exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier
        application is permitted for nonmonetary asset exchanges occurring in fiscal
        periods beginning after the date of issuance. The provisions of this Statement
        shall be applied prospectively. The Company has evaluated the impact of the
        adoption of SFAS 152, and does not believe the impact will be significant
        to the
        Company's overall results of operations or financial position.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        December 2004, the FASB issued SFAS No.123 (revised 2004), &#8220;Share-Based Payment&#8221;
Statement 123(R) will provide investors and other users of financial statements
        with more complete and neutral financial information by requiring that the
        compensation cost relating to share-based payment transactions be recognized
        in
        financial statements. That cost will be measured based on the fair value
        of the
        equity or liability instruments issued. Statement 123(R) covers a wide range
        of
        share-based compensation arrangements including share options, restricted
        share
        plans, performance-based awards, share appreciation rights, and employee
        share
        purchase plans. Statement 123(R) replaces FASB Statement No. 123, Accounting
        for
        Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for
        Stock Issued to Employees. Statement 123, as originally issued in 1995,
        established as preferable a fair-value-based method of accounting for
        share-based payment transactions with employees. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">However,
        that Statement permitted entities the option of continuing to apply the guidance
        in Opinion 25, as long as the footnotes to financial statements disclosed
        what
        net income would have been had the preferable fair-value-based method been
        used.
        Public entities (other than those filing as small business issuers) will
        be
        required to apply Statement 123(R) as of the first interim or annual reporting
        period that begins after June 15, 2005 and small business issuers will be
        required to adopt for reporting periods beginning after December 15, 2005.
        The
        Company has evaluated the impact of the adoption of SFAS 123(R), and believes
        the impact of amortization of issued unvested options will not be significant
        to
        the Company&#8217;s overall results of operations or financial position.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        June&#160;2005, the FASB issued SFAS 154, &#8220;Accounting Changes and Error
        Corrections,&#8221; a replacement of existing accounting pronouncements. SFAS 154
        modifies accounting and reporting requirements when a company voluntarily
        chooses to change an accounting principle or correct an accounting error.
        SFAS
        154 requires retroactive restatement of prior period financial statements
        unless
        it is impractical. Previous accounting guidelines allowed recognition by
        cumulative effect in the period of the accounting change. SFAS 154 is effective
        for accounting changes and corrections of errors made in fiscal years beginning
        after December&#160;15, 2005. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        February 2006, the FASB issued SFAS 155 Accounting for Certain Hybrid Financial
        Instruments, an amendment of SFAS 133 and 140. These SFAS&#8217;s deal with derivative
        and hedging activities and accounting for transfers and servicing of financial
        instruments and extinguishment of liabilities. FAS 155 is effective for all
        financial instruments acquired or issued in an entity&#8217;s first fiscal year
        beginning after September 15, 2006. The Company does not engage in the
        activities described in these SFAS&#8217;s and does not have any intention of engaging
        in those activities when SFAS 155 becomes effective. The Company has evaluated
        the impact of the adoption of SFAS 155, and does not believe the impact will
        be
        significant to the Company's overall results of operations or financial
        position.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
      </div>
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        </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"><strong>OFF-BALANCE
      SHEET ARRANGEMENTS</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      have
      not entered into any financial guarantees or other commitments to guarantee
      the
      payment obligations of any third parties. We have not entered into any
      derivative contracts that are indexed to our shares and classified as
      shareholder&#8217;s equity or that are not reflected in our consolidated financial
      statements. Furthermore, we do not have any retained or contingent interest
      in
      assets transferred to an unconsolidated entity that serves as credit, liquidity
      or market risk support to such entity. We do not have any variable interest
      in
      any unconsolidated entity that provides financing, liquidity, market risk or
      credit support to us or engages in leasing, hedging or research and development
      services with 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: 10pt; FONT-FAMILY: Times New Roman"><strong>INFLATION</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      believe that inflation has not had a material effect on our operations to
      date.</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: 10pt; FONT-FAMILY: Times New Roman"><strong><u>RISK
      FACTORS</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>FACTORS
      THAT MAY AFFECT FUTURE PERFORMANCE</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Before
      investing in our common stock you should carefully consider the following risk
      factors, the other information included herein and the information included
      in
      our other reports and filings.&#160; Our business, financial condition, and the
      trading price of our common stock could be adversely affected by these and
      other
      risks.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</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">RISKS
      OF
      THE BUSINESS</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Because
      we are not profitable and expect to incur additional losses, we will require
      additional financing to sustain our operations and without it we may not be
      able
      to continue operations.</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      At
      December 31, 2005, we had cash on hand of $69,440 and, for the fiscal year
      ended
      December 31, 2005, incurred an operating loss of $7.8 million. As of December
      31, 2005, we had an accumulated deficit of approximately $32.8 million which
      includes losses incurred to date and preferred stock dividends in the form
      of
      common stock. We have never earned a profit and we anticipate that we will
      continue to incur losses for at least the next 18 months. We continue to operate
      on a negative cash flow basis. Our independent accountants have issued a going
      concern qualification in their report on our financial statements as of and
      for
      the period ending December 31, 2005. We believe that we will need to raise
      at
      least an additional $5 million in financing in order to have sufficient
      financial resources to fund our operations for the next 12 months because we
      are
      running a cash flow deficit. We may need additional funds to continue our
      operations, and such additional funds may not be available when required.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
      date,
      we have financed our operations through the sale of stock and certain
      borrowings. We expect to continue to depend upon outside financing to sustain
      our operations for at least the next 12 months. Our ability to arrange financing
      from third parties will depend upon our perceived performance and market
      conditions. Our inability to raise additional working capital at all or to
      raise
      it in a timely manner would negatively impact our ability to fund our
      operations, to generate revenues, and to otherwise execute our business plan,
      leading to the reduction or suspension of our operations and ultimately forcing
      us to go out of business. </font></div>
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      </div>
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>We
      have no committed sources of additional capital.</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      For the
      foreseeable future, we intend to fund our operations and capital expenditures
      from limited cash flow from operations, our cash on hand and the net proceeds
      from equity financings. If our capital resources are insufficient, we will
      have
      to raise additional funds. We may need additional funds to continue our
      operations, pursue business opportunities (such as expansion, acquisitions
      of
      complementary businesses or the development of new products or services), to
      react to unforeseen difficulties or to respond to competitive pressures. We
      cannot assure you that any financing arrangements will be available in amounts
      or on terms acceptable to us, if at all. If additional financing is not
      available when required or is not available on acceptable terms, we may be
      unable to fund our expansion, successfully promote our current products, license
      new products or enhance our products and services, take advantage of business
      opportunities, or respond to competitive pressures, any of which could have
      a
      material adverse effect on our business and the value of our common stock.
      If we
      choose to raise additional funds through the issuance of equity securities,
      this
      may cause significant dilution of our common stock, and holders of the
      additional equity securities may have rights senior to those of the holders
      of
      our common stock. If we obtain additional financing by issuing debt securities,
      the terms of these securities could restrict or prevent us from paying dividends
      and could limit our flexibility in making business decisions.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>We
      are an early stage company with a limited operating history no significant
      revenues</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>.
      </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      were
      formed in November 2000. Since that time, we have engaged in the formulation
      of
      a business strategy and the design and development of technologically advanced
      products. We have recorded limited revenues from various government-funded
      research programs, and we have generated only limited revenues from the sale
      of
      products. Our ability to implement a successful business plan remains unproven
      and no assurance can be given that we will ever generate sufficient revenues
      to
      sustain our business.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>We
      do not have sufficient revenues to service our debt. </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
      of
      December 31, 2005, we had $3.0 million of debt secured by our fixed assets
      and
      intellectual property. The debt accrues interest at a rate of 10% per annum
      and
      requires monthly payments until June 25, 2007. Additional debt accrues interest
      at a rate of 10% per annum and requires monthly payments until September 30,
      2008, and may be extended at the option of the lenders under certain conditions.
      On November 25, 2005, we added $500,000 of bridge debt secured by our fixed
      assets and intellectual property. On January 25, 2006, we extended the maturity
      date of the bridge debt from January 31, 2006 to March 27, 2006 and granted
      300,000 additional warrants and paid the note holders an additional fee. We
      will
      be forced to grant additional warrants the longer this debt remains outstanding
      which will dilute your ownership. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; 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
      debt
      accrues interest at a rate of 10% per annum and is intended to be repaid from
      the proceeds of equity offering. We may not have enough capital to be able
      to
      fully cover debt service on these and other notes. We are relying on increased
      revenue and additional capital infusions to pay off this debt. We may not be
      able to increase our revenues or raise sufficient funds from third parties
      in
      order to carry out our business plan or repay the debt.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>We
      have only limited proven commercial products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      We are
      currently engaged in the design and development of laser diode products for
      certain industrial and defense applications. Our most advanced technologies,
      including without limitation, our &#8220;Generation III&#8221; products, are in the design
      or prototype stage. These technologies may not be commercially viable for at
      least one year, more specifically, we expect to ship prototypes of our
      Generation III products in the fourth quarter of 2006, if they ever become
      viable at all. We have received only a limited number of purchase orders for
      our
      products and we only have a limited number of contractual arrangements to sell
      our products. The process of qualifying laser diodes for purchase by commercial
      or defense customers is lengthy and unpredictable. No assurance can be given
      that any of our products will achieve commercial success.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>We
      are dependent on our customers and vulnerable to their sales and production
      cycles</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      For the
      most part, we do not sell end-user products. We sell laser components that
      are
      incorporated by our customers into their products. Therefore, we are vulnerable
      to our customers&#8217; prosperity and sales growth. Failure of our customers to sell
      their products will ultimately hurt their demand for our products, and thus,
      have a material adverse effect on our revenues.</font></div>
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      </div>
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Unusually
      long sales cycles may cause us to incur significant expenses without offsetting
      revenue</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Customers often view the purchase of our products as a significant and strategic
      decision. Accordingly, customers typically expend significant effort in
      evaluating and testing our products before making a decision to purchase them,
      resulting in a long sales cycle, While our customers are evaluating our products
      and before they place an order, we may incur substantial expenses for sales
      and
      marketing and research and development to customize our products to the
      customer's needs. Even after evaluation, a potential customer may not purchase
      our products. As a result, these long sales cycles may cause us to incur
      significant expenses without ever receiving revenue to offset those
      expenses.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>The
      markets for our products are subject to continuing change that may impair our
      ability to successfully sell our products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      markets for laser diode products are volatile and subject to continuing change.
      For example, since 2001, the market for telecommunications and data
      communications products has been severely depressed while a more robust market
      for defense and homeland security applications has developed during the past
      year and a half. We must continuously adjust our marketing strategy to address
      the changing state of the markets for laser diode products, we may not be able
      to anticipate changes in the market and, as a result, our product strategies
      may
      be unsuccessful.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Our
      products may become obsolete if we are unable to stay abreast of technological
      developments</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      photonics industry is characterized by rapid and continuous technological
      development if we are unable to stay abreast of such developments, our products
      may become obsolete. We lack the substantial research and development resources
      of some of our competitors. This may limit our ability to remain technologically
      competitive.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>We
      are dependent for our success on a few key executive officers. Our inability
      to
      retain those officers would impede our business plan and growth strategies,
      which would have a negative impact on our business and the value of your
      investment. </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      success depends on the skills, experience and performance of key members of
      our
      management team. We are heavily dependent on the continued services of Jeffrey
      Ungar, our Chief Executive Officer, George Lintz, our Chief Financial Officer
      and Chief Operating Officer, Thomas Stakelon, our Vice President, Engineering,
      and Paul Rudy, our Senior Vice President of Marketing and Sales. We do not
      have
      long-term employment agreements with any of the members of our senior management
      team. Each of those individuals without long-term employment agreements may
      voluntarily terminate his employment with the Company at any time upon short
      notice. Were we to lose one or more of these key executive officers, we would
      be
      forced to expend significant time and money in the pursuit of a replacement,
      which would result in both a delay in the implementation of our business plan
      and the diversion of limited working capital. We can give you no assurance
      that
      we can find satisfactory replacements for these key executive officers at all,
      or on terms that are not unduly expensive or burdensome to our company. We
      maintain $3.0 million and $2.0 million key man insurance policies on Mr. Ungar
      and Mr. Lintz, respectively. Although we intend to issue stock options or other
      equity-based compensation to attract and retain employees, such incentives
      may
      not be sufficient to attract and retain key personnel. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>We
      are also dependent for our success on our ability to attract and retain
      technical personnel, sales and marketing personnel and other skilled management.
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      success depends to a significant degree upon our ability to attract, retain
      and
      motivate highly skilled and qualified personnel. Failure to attract and retain
      necessary </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">technical
      personnel, sales and marketing personnel and skilled management could
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">adversely
      affect our business. If we fail to attract, train and retain sufficient numbers
      of these highly qualified people, our prospects, business, financial condition
      and results of operations will be materially and adversely affected.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Our
      business is dependent upon proprietary intellectual property
      rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      We have
      employed proprietary information to design our products. We seek to protect
      our
      intellectual property rights through a combination of patent filings, trademark
      registrations, confidentiality agreements and inventions agreements. However,
      no
      assurance can be given that such measures will be sufficient to protect our
      intellectual property rights. If we cannot protect our rights, we may lose
      our
      competitive advantage. Moreover, if it is determined that our products infringe
      on the intellectual property rights of third parties, we may be prevented from
      marketing our products. </font></div>
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>The
      grant to Finisar of a nonexclusive license to our intellectual property rights
      may impair our ability to realize the full value of our intellectual property
      assets. </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pursuant
      to the terms of an Exchange Agreement with Finisar, we granted Finisar a royalty
      free, fully paid, nonexclusive license to all of our existing and future
      intellectual property (the "IP License"). Finisar has no right to grant
      sub-licenses (except to end users) or assign its rights prior to September
      2006.
      The Company may pay Finisar a forbearance fee of up to $1,500,000 (to be
      credited against the Termination Fee described hereinafter), to extend the
      restriction on sub-licensing or assignment by Finisar until September 2008.
      The
      Company may extinguish this license by paying Finisar a Termination Fee of
      $5,000,000 at any time prior to September 2006, $5,500,000 from September 2006
      through September 2007 or $6,000,000 from September 2007 until September 2008.
      In addition, the Company granted Finisar most favored nation pricing assurances
      with respect to all Company products. No assurance can be given that we will
      have adequate funds to repurchase the IP License prior to expiration of our
      repurchase rights. The existence of the IP License may impair our ability to
      realize the full value of our intellectual property assets. For example, we
      will
      not be able to enter into an exclusive license arrangement with any party as
      long as the IP License is outstanding. Finisar may potentially sell similar
      products at lower prices, thereby reducing our profit margin. Potential
      licensees may be expected to offer us less value for any nonexclusive rights
      as
      compared to the value we might realize if we were to grant exclusive rights.
      Moreover, the existence of the IP License may make it more difficult to enter
      into strategic business relationships with third parties. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>We
      currently rely on R&amp;D Contracts with the U.S.
      Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Currently, a significant part of our near term revenue is expected to be derived
      from research contracts from the U.S. Government. Changes in the priorities
      of
      the U.S. Government may affect the level of funding of programs. We may benefit
      if greater funds are allocated toward defense spending to the extent that our
      business is relevant to such defense programs. However, changes in priorities
      of
      government spending may diminish interest in sponsoring research programs in
      our
      area of expertise.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>We
      may incur debt or issue preferred stock in the future</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      In
      order to purchase equipment, terminate the Finisar License Agreement or fund
      operations, QPC may issue additional debt instruments or preferred stock which
      will have a senior claim on the assets of QPC in the event of a sale of assets.
      Debt service may cause strain on cash flow and impair business
      operations.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>We
      face intense competition, including competition from companies with
      significantly greater resources than ours, and if we are unable to compete
      effectively with these companies, our market share may decline and our business
      could be harmed. </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      laser
      industry is highly competitive with numerous competitors from well-established
      manufacturers to innovative start-ups. A number of our competitors have
      significantly greater financial, technological, engineering, manufacturing,
      marketing and distribution resources than we do. Their greater capabilities
      in
      these areas may enable them to compete more effectively on the basis of price
      and production and more quickly develop new products and technologies. In
      addition, new companies may enter the markets in which we compete, further
      increasing competition in the laser industry. For instance, larger companies
      such as Northrop Grumman and BAE Systems are currently developing laser
      technology to protect airliners from portable rocket launchers. We believe
      that
      our ability to compete successfully depends on a number of factors, including
      our innovative and advanced R &amp; D department, strength of our intellectual
      property rights, and advanced manufacturing facility are the most important
      competitive factors and we plan to employ these elements as we develop our
      products and technologies, but there are many other factors beyond our control.
      We may not be able to compete successfully in the future, and increased
      competition may result in price reductions, reduced profit margins, loss of
      market share and an inability to generate cash flows that are sufficient to
      maintain or expand our development and marketing of new products, which would
      adversely impact the trading price of our common shares. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>If
      our facilities were to experience catastrophic loss, our operations would be
      seriously harmed. </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      facilities could be subject to a catastrophic loss from fire, flood, earthquake
      or terrorist activity. All of our research and development activities,
      manufacturing, our corporate headquarters and other critical business operations
      are located near major earthquake faults in Sylmar, California, an area with
      a
      history of seismic events. Any such loss at this facility could disrupt our
      operations, delay production, and revenue and result in large expenses to repair
      or replace the facility. While we have obtained insurance to cover most
      potential losses, we cannot assure you that our existing insurance coverage
      will
      be adequate against all other possible losses.</font></div>
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      </div>
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>The
      relative lack of public company experience of our management team may put us
      at
      a competitive disadvantage. </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      management team lacks public company experience, which could impair our ability
      to comply with legal and regulatory requirements such as those imposed by
      Sarbanes-Oxley Act of 2002. The individuals who now constitute our senior
      management have never had responsibility for managing a publicly traded company.
      Such responsibilities include complying with Federal securities laws and making
      required disclosures on a timely basis. Our senior management may not be able
      to
      implement and affect programs and policies in an effective and timely manner
      that adequately respond to such increased legal, regulatory compliance and
      reporting requirements. Our failure to do so could lead to the imposition of
      fines and penalties and further result in the deterioration of our
      business.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>New
      rules, including those contained in and issued under the Sarbanes-Oxley Act
      of
      2002, may make it difficult for us to retain or attract qualified officers
      and
      directors, which could adversely affect the management of our business and
      our
      ability to obtain or retain listing of our common stock. </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      may be
      unable to attract and retain qualified officers, directors and members of board
      committees required to provide for our effective management as a result of
      the
      recent and currently proposed changes in the rules and regulations which govern
      publicly-held companies, including, but not limited to, certifications from
      executive officers and requirements for financial experts on the board of
      directors. The perceived increased personal risk associated with these recent
      changes may deter qualified individuals from accepting these roles. The
      enactment of the Sarbanes-Oxley Act of 2002 has resulted in the issuance of
      a
      series of new rules and regulations and the strengthening of existing rules
      and
      regulations by the SEC. Further, certain of these recent and proposed changes
      heighten the requirements for board or committee membership, particularly with
      respect to an individual&#8217;s independence from the corporation and level of
      experience in finance and accounting matters. We may have difficulty attracting
      and retaining directors with the requisite qualifications. If we are unable
      to
      attract and retain qualified officers and directors, the management of our
      business could be adversely affected. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Our
      internal controls over financial reporting may not be effective, and our
      independent auditors may not be able to certify as to their effectiveness,
      which
      could have a significant and adverse effect on our business.
</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      are
      subject to various regulatory requirements, including the Sarbanes-Oxley Act
      of
      2002. We, like all other public companies, must incur additional expenses and,
      to a lesser extent, diversion of our management&#8217;s time in our efforts to comply
      with Section&#160;404 of the Sarbanes-Oxley Act of 2002 regarding internal
      controls over financial reporting. We have not evaluated our internal controls
      over financial reporting in order to allow management to report on, and our
      independent auditors to attest to, our internal controls over financial
      reporting, as required by Section&#160;404 of the Sarbanes-Oxley Act of 2002 and
      the rules and regulations of the SEC, which we collectively refer to as
      Section&#160;404. We have never performed the system and process evaluation and
      testing required in an effort to comply with the management assessment and
      auditor certification requirements of Section&#160;404, which will initially
      apply to us as of December&#160;31, 2006. Our lack of familiarity with Section
      404 may unduly divert management&#8217;s time and resources in executing the business
      plan. If, in the future, management identifies one or more material weaknesses,
      or our external auditors are unable to attest that our management&#8217;s report is
      fairly stated or to express an opinion on the effectiveness of our internal
      controls, this could result in a loss of investor confidence in our financial
      reports, have an adverse effect on our stock price and/or subject us to
      sanctions or investigation by regulatory authorities.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>If
      we are unable to obtain adequate insurance, our financial condition could be
      adversely affected in the event of uninsured or inadequately insured loss or
      damage. Our ability to effectively recruit and retain qualified officers and
      directors could also be adversely affected if we experience difficulty in
      obtaining adequate directors&#8217; and officers&#8217; liability insurance.
</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Although
      we currently have property insurance, liability insurance, and employment
      practices liability insurance, we may not be able to obtain all insurance
      policies that would adequately insure our business and property against damage,
      loss or claims by third parties. To the extent our business or property suffers
      any damages, losses or claims by third parties, which are not covered or
      adequately covered by insurance, our financial condition may be materially
      adversely affected. We may be unable to maintain sufficient insurance as a
      public company to cover liability claims made against our officers and
      directors. If we are unable to adequately insure our officers and directors,
      we
      may not be able to retain or recruit qualified officers and directors to manage
      the Company. </font></div>
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      </div>
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      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Economic,
      political, military or other events in the United States could interfere with
      our success or operations and harm our business. </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      market
      and sell our products and services in the United States and abroad. The
      September&#160;11, 2001 terrorist attacks disrupted commerce throughout the
      United States and other parts of the world. The continued threat of similar
      attacks throughout the world and the military action, or possible military
      action, taken by the United States and other nations, in Iraq or other countries
      may cause significant disruption to commerce throughout the world. To the extent
      that such disruptions further slow the global economy or, more particularly,
      result in delays or cancellations of purchase orders for our products or extends
      the sales cycles with potential customers, our business and results of
      operations could be materially adversely affected. We are unable to predict
      whether the threat of new attacks or the responses thereto will result in any
      long-term commercial disruptions or if such activities or responses will have
      a
      long-term material adverse effect on our business, results of operations or
      financial condition. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.4pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">MARKET
      RISKS. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Our
      common stock may be thinly traded, so you may be unable to sell at or near
      ask
      prices or at all if you need to sell your shares to raise money or otherwise
      desire to liquidate your shares. </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Prior
      to
      the Share Exchange, QLI&#8217;s common shares have had no trading volume on the OTC
      Bulletin Board. Through this Share Exchange, QPC has essentially become public
      without the typical initial public offering procedures which usually include
      a
      large selling group of broker-dealers who may provide market support after
      going
      public. Thus, we will be required to undertake efforts to develop market
      recognition for us and support for our shares of common stock in the public
      market. The price and volume for our common stock that will develop after the
      Share Exchange cannot be assured. The number of persons interested in purchasing
      our common stock at or near ask prices at any given time may be relatively
      small
      or non-existent. This situation may be attributable to a number of factors,
      including the fact that we are a small company which is relatively unknown
      to
      stock analysts, stock brokers, institutional investors and others in the
      investment community that generate or influence sales volume, and that even
      if
      we came to the attention of such persons, they tend to be risk-averse and would
      be reluctant to follow an unproven company such as ours or purchase or recommend
      the purchase of our shares until such time as we became more seasoned and
      viable. As a consequence, there may be periods of several days, weeks, months,
      or more when trading activity in our shares is minimal or non-existent, as
      compared to a seasoned issuer which has a large and steady volume of trading
      activity that will generally support continuous sales without an adverse effect
      on share price. We cannot give you any assurance that a broader or more active
      public trading market for our common stock will develop or be sustained. While
      we are trading on the OTC Bulletin Board, the trading volume we will develop
      may
      be limited by the fact that many major institutional investment funds, including
      mutual funds, as well as individual investors follow a policy of not investing
      in Bulletin Board stocks and certain major brokerage firms restrict their
      brokers from recommending Bulletin Board stocks because they are considered
      speculative, volatile and thinly traded.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>The
      application of the &#8220;penny stock&#8221; rules to our common stock could limit the
      trading and liquidity of the Common Stock, adversely affect the market price
      of
      our common stock and increase your transaction costs to sell those shares.
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
      long
      as the trading price of our common stock is below $5 per share, the open-market
      trading of our common stock will be subject to the &#8220;penny stock&#8221; rules, unless
      we otherwise qualify for an exemption from the &#8220;penny stock&#8221; definition. The
&#8220;penny stock&#8221; rules impose additional sales practice requirements on certain
      broker-dealers who sell securities to persons other than established customers
      and accredited investors (generally those with assets in excess of $1,000,000
      or
      annual income exceeding $200,000 or $300,000 together with their spouse). These
      regulations, if they apply, require the delivery, prior to any transaction
      involving a penny stock, of a disclosure schedule explaining the penny stock
      market and the associated risks. Under these regulations, certain brokers who
      recommend such securities to persons other than established customers or certain
      accredited investors must make a special written suitability determination
      regarding such a purchaser and receive such purchaser&#8217;s written agreement to a
      transaction prior to sale. These regulations may have the effect of limiting
      the
      trading activity of our common stock, reducing the liquidity of an investment
      in
      our common stock and increasing the transaction costs for sales and purchases
      of
      our common stock as compared to other securities.</font></div>
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        </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"><strong>The
      market price for our common stock may be particularly volatile given our status
      as a relatively unknown company with a small and thinly traded public float,
      limited operating history and lack of profits which could lead to wide
      fluctuations in our share price. </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      market for our common stock may be characterized by significant price volatility
      when compared to seasoned issuers, and we expect that our share price could
      continue to be more volatile than a seasoned issuer for the indefinite future.
      The potential volatility in our share price is attributable to a number of
      factors. First, as noted above, our shares of common stock may be sporadically
      and thinly traded. As a consequence of this lack of liquidity, the trading
      of
      relatively small quantities of shares by our stockholders may disproportionately
      influence the price of those shares in either direction. The price for our
      shares could, for example, decline precipitously in the event that a large
      number of our shares of common stock are sold on the market without commensurate
      demand, as compared to a seasoned issuer which could better absorb those sales
      without adverse impact on its share price. Second, we are a speculative or
      &#8220;risky&#8221; investment due to our limited operating history and lack of profits to
      date, and uncertainty of future market acceptance for our potential products.
      As
      a consequence of this enhanced risk, more risk averse investors may, under
      the
      fear of losing all or most of their investment in the event of negative news
      or
      lack of progress, be more inclined to sell their shares on the market more
      quickly and at greater discounts than would be the case with the stock of a
      seasoned issuer. Many of these factors will be beyond our control and may
      decrease the market price of our common shares, regardless of our operating
      performance. We cannot make any predictions or projections as to what the
      prevailing market price for our common stock will be at any time. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      addition, the market price of our common stock could be subject to wide
      fluctuations in response to: </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;&#160;
              &#160;</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">quarterly
                variations in our revenues and operating expenses;
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;&#160;
              &#160;</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">announcements
                of new products or services by us; </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;
              &#160;&#160;</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">fluctuations
                in interest rates; </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;&#160;
              &#160;</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">significant
                sales of our common stock, including &#8220;short&#8221;
                sales;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;&#160;
              &#160;</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
                operating and stock price performance of other companies that investors
                may deem comparable to us; and </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;&#160;
              &#160;</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">news
                reports relating to trends in our markets or general economic
                conditions.</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">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; 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
      stock
      market in general, and the market prices for penny stock companies in
      particular, have experienced volatility that often has been unrelated to the
      operating performance of such companies. These broad market and industry
      fluctuations may adversely affect the price of our stock, regardless of our
      operating performance.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Stockholders
      should be aware that, according to SEC Release No. 34-29093, the market for
      penny stocks has suffered in recent years from patterns of fraud and abuse.
      Such
      patterns include (1) control of the market for the security by one or a few
      broker-dealers that are often related to the promoter or issuer; (2)
      manipulation of prices through prearranged matching of purchases and sales
      and
      false and misleading press releases; (3) boiler room practices involving
      high-pressure sales tactics and unrealistic price projections by inexperienced
      sales persons; (4) excessive and undisclosed bid-ask differential and markups
      by
      selling broker-dealers; and (5) the wholesale dumping of the same securities
      by
      promoters and broker-dealers after prices have been manipulated to a desired
      level, along with the resulting inevitable collapse of those prices and with
      consequent investor losses. Our management is aware of the abuses that have
      occurred historically in the penny stock market. Although we do not expect
      to be
      in a position to dictate the behavior of the market or of broker-dealers who
      participate in the market, management will strive within the confines of
      practical limitations to prevent the described patterns from being established
      with respect to our securities. The occurrence of these patterns or practices
      could increase the volatility of our share price.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</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">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">22</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </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"><strong>Limitations
      on director and officer liability and indemnification of our officers and
      directors by us may discourage stockholders from bringing suit against a
      director. </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">QLI&#8217;s
      articles of incorporation and bylaws provide, with certain exceptions as
      permitted by governing state law, that a director or officer shall not be
      personally liable to us or our stockholders for breach of fiduciary duty as
      a
      director, except for acts or omissions which involve intentional misconduct,
      fraud or knowing violation of law, or unlawful payments of dividends. These
      provisions may discourage stockholders from bringing suit against a director
      for
      breach of fiduciary duty and may reduce the likelihood of derivative litigation
      brought by stockholders on our behalf against a director. In addition, QLI&#8217;s
      articles of incorporation and bylaws may provide for mandatory indemnification
      of directors and officers to the fullest extent permitted by governing state
      law. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>We
      do not expect to pay dividends for the foreseeable future, and we may never
      pay
      dividends</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      We
      currently intend to retain any future earnings to support the development and
      expansion of our business and do not anticipate paying cash dividends in the
      foreseeable future. Our payment of any future dividends will be at the
      discretion of our board of directors after taking into account various factors,
      including but not limited to our financial condition, operating results, cash
      needs, growth plans and the terms of any credit agreements that we may be a
      party to at the time. In addition, our ability to pay dividends on our common
      stock may be limited by state law. Accordingly, investors must rely on sales
      of
      their Common Stock after price appreciation, which may never occur, as the
      only
      way to realize their investment. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Our
      operating results may fluctuate significantly, and these fluctuations may cause
      our common stock price to fall. </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      quarterly operating results may fluctuate significantly in the future due to
      a
      variety of factors that could affect our revenues or our expenses in any
      particular quarter. You should not rely on quarter-to-quarter comparisons of
      our
      results of operations as an indication of future performance. Factors that
      may
      affect our quarterly results include: </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;&#160;
              &#160;</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">market
                acceptance of our products and technologies and those of our
                competitors;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;
              &#160;&#160;</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">speed
                of commercialization of our early stage, state-of-the-art designs
                and
                developments;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;&#160;
              &#160;</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">our
                ability to attract and retain key personnel;
                and</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;&#160;
              &#160;</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">our
                ability to manage our anticipated growth and
                expansion.</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">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Our
      executive officers, directors and insider stockholders own or control at least
      45% of our outstanding common stock, which may limit your ability and the
      ability of our other stockholders, whether acting alone or together, to propose
      or direct the management or overall direction of our Company. Additionally,
      this
      concentration of ownership could discourage or prevent a potential takeover
      of
      our Company that might otherwise result in you receiving a premium over the
      market price for your Shares. </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      estimate that approximately 45% of our outstanding shares of common stock is
      owned and controlled by a group of insiders, including our directors and
      executive officers. Such concentrated control of the Company may adversely
      affect the price of our common stock. Our principal stockholders may be able
      to
      control matters requiring approval by our stockholders, including the election
      of directors, mergers or other business combinations. Such concentrated control
      may also make it difficult for our stockholders to receive a premium for their
      shares of our common stock in the event we merge with a third party or enter
      into different transactions which require stockholder approval. These provisions
      could also limit the price that investors might be willing to pay in the future
      for shares of our common stock. In addition, certain provisions of Nevada law
      could have the effect of making it more difficult or more expensive for a third
      party to acquire, or of discouraging a third party from attempting to acquire,
      control of us.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Accordingly, the existing principal stockholders together with </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">our
      directors and executive officers</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      will
      have the power to control the election of our directors and the approval of
      actions for which the approval of our stockholders is required. If you acquire
      Shares, you may have no effective voice in the management of the
      Company.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</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">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">23</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </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"><strong>Future
      sales of our equity securities could put downward selling pressure on our
      securities, and adversely affect the stock price. There is a risk that this
      downward pressure may make it impossible for an investor to sell his securities
      at any reasonable price, if at all. </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Future
      sales of substantial amounts of our equity securities in the public market,
      or
      the perception that such sales could occur, could put downward selling pressure
      on our securities, and adversely affect the market price of our common
      stock.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      foregoing risk factors are intended only as a summary of certain risk factors
      attendant to an investment in the Securities. </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="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>DESCRIPTION
      OF PROPERTY</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company&#8217;s headquarters is currently located at </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">15632
      Roxford Street, Sylmar, California 91342. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      We use
      18,000 square feet of our leased 40,320 square foot building which allows us
      to
      conduct nearly all of our operations on site, including R&amp;D, semiconductor
      wafer fabrication, processing and packaging. We sublet the remainder of our
      facility for warehousing space. </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 id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">24</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </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><u>SECURITY
      OWNERSHIP OF CERTAIN</u></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: 10pt; FONT-FAMILY: Times New Roman"><strong><u>BENEFICIAL
      OWNERS AND MANAGEMENT</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>SECURITY
      OWNERSHIP OF BENEFICIAL OWNERSHIP AND MANAGEMENT</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PRIOR
      TO THE SHARE EXCHANGE</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      following table sets forth, as of May 12, 2006, certain information regarding
      the ownership of the Company&#8217;s capital stock by the following persons on such
      date: each of the directors and executive officers, each person who is known
      to
      be a beneficial owner of more than 5% of any class of our voting stock, and
      all
      of our officers and directors as a group. Unless otherwise indicated below,
      to
      our knowledge, all persons listed below had sole voting and investing power
      with
      respect to their shares of capital stock, except to the extent authority was
      shared by spouses under applicable community property laws.</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">Beneficial
      ownership is determined in accordance with the rules of the Securities and
      Exchange Commission and generally includes voting or investment power with
      respect to securities. Shares of our common stock subject to options, warrants
      or convertible securities exercisable or convertible within 60 days of May
      12,
      2006 were deemed outstanding for computing the percentage of the person or
      entity holding such options, warrants or convertible securities but are not
      deemed outstanding for computing the percentage of any other person, and was
      based on 52,300,000 shares of the Common Stock issued and outstanding on a
      fully
      diluted basis, as of May 12, 2006. </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 border="1" bordercolor="black" cellpadding="0" cellspacing="0" width="100%">

          <tr bgcolor="white">
            <td valign="bottom" width="15%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</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">Title
                of </font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Class</font></div>
            </td>
            <td valign="bottom" width="31%">
              <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">Name
                and Address</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Of
                </font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Beneficial
                Owners (1)</font></div>
            </td>
            <td valign="bottom" 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: 10pt; FONT-FAMILY: Times New Roman">Amount
                and Nature</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Of
                Beneficial Ownership</font></div>
            </td>
            <td valign="bottom" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Percent</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Of
                </font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Class
                </font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="15%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Common
                Stock</font></div>
            </td>
            <td align="left" valign="top" width="31%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Julie
                Morin (2)</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td valign="top" 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: 10pt; FONT-FAMILY: Times New Roman">50,000,000</font></div>
            </td>
            <td valign="top" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">96%</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="15%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="top" width="31%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; 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
                officers and directors as a group (1 person)</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td valign="top" width="15%" style="border-bottom: black thin solid;">
              <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">50,000,000
                </font></div>
            </td>
            <td valign="top" width="11%" style="border-bottom: black thin solid;">
              <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">96%</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">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">____________</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; 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><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;&#160;</font></div>
            </td>
            <td align="left" valign="top" width="66%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Unless
                otherwise noted, the address for each of the named beneficial owners
                and
                directors and officers is 703 E. 27</font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><sup>th</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                Street, Spokane, Washington 99203.</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 cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; 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><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;&#160;</font></div>
            </td>
            <td align="left" valign="top" width="66%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Julie
                Morin is the Chief Executive Officer and sole Director of QPC Lasers,
                Inc.
                This excludes the sale of 48,294,115 shares of Company common stock
                to
                Target and transfer of 1,334,385 shares of&#160;Company common
                stock&#160;concurrent with the Share
                Exchange.</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">
      <div>
        <hr style="COLOR: black" align="center" noshade size="1" width="100%">
      </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"><strong>SECURITY
      OWNERSHIP OF BENEFICIAL OWNERSHIP AND MANAGEMENT&#160;</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>AFTER
      THE SHARE EXCHANGE</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      following table sets forth information as of May 12, 2006 with respect to the
      beneficial ownership of the outstanding shares of Company&#8217;s capital stock
      immediately following the Share Exchange by (i) each person known by Registrant
      who will beneficially own five percent (5%) or more of the outstanding shares;
      (ii) the officers and directors who will take office as of the effective date
      of
      the Share Exchange; and (iii) all the aforementioned officers and directors
      as a
      group. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">25</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </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>
      <table border="1" bordercolor="black" cellpadding="0" cellspacing="0" width="100%">

          <tr bgcolor="white">
            <td valign="bottom" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</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">Title
                of </font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Class</font></div>
            </td>
            <td valign="bottom" width="25%">
              <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">Name
                and Address</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Of
                </font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Beneficial
                Owners (1)</font></div>
            </td>
            <td valign="bottom" width="16%">
              <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">Amount
                and Nature</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Of
                Beneficial Ownership</font></div>
            </td>
            <td valign="bottom" width="17%">
              <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">Percent</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Of
                </font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Class
                (2)</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Common
                Stock</font></div>
            </td>
            <td align="left" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Jeffrey
                Ungar (3)</font></div>
            </td>
            <td align="right" valign="top" width="16%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4,640,060</font></div>
            </td>
            <td align="right" valign="top" width="17%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 8.1pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14.6%</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="13%">&#160;</td>
            <td align="left" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">George
                Lintz (4)</font></div>
            </td>
            <td align="right" valign="top" width="16%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,858,184</font></div>
            </td>
            <td align="right" valign="top" width="17%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 8.1pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">8.8%</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="13%">&#160;</td>
            <td align="left" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Israel
                Ury</font></div>
            </td>
            <td align="right" valign="top" width="16%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">71,030</font></div>
            </td>
            <td align="right" valign="top" width="17%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 8.1pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">*</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="13%">&#160;</td>
            <td align="left" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Robert
                Adams (5)</font></div>
            </td>
            <td align="right" valign="top" width="16%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font size="2">107,059</font></div>
            </td>
            <td align="right" valign="top" width="17%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 8.1pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">*</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="13%">
            </td>
            <td align="left" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Merrill
                McPeak (6)</font></div>
            </td>
            <td align="right" valign="top" width="16%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">58,333</font></div>
            </td>
            <td align="right" valign="top" width="17%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 8.1pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">*</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="13%">&#160;</td>
            <td align="left" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Thomas
                Stakelon</font></div>
            </td>
            <td align="right" valign="top" width="16%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">233,000</font></div>
            </td>
            <td align="right" valign="top" width="17%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 8.1pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">*</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="13%">&#160;</td>
            <td align="left" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Paul
                Rudy(7)</font></div>
            </td>
            <td align="right" valign="top" width="16%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">425,000</font></div>
            </td>
            <td align="right" valign="top" width="17%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 8.1pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.4%</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Finisar
                Corporation</font></div>
            </td>
            <td align="right" valign="top" width="16%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6,750,726</font></div>
            </td>
            <td align="right" valign="top" width="17%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 8.1pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">21.8%</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="13%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="top" width="25%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; 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
                officers and directors as a group (7 persons) - Ownership of Common
                Stock
                (8)</font></div>
            </td>
            <td align="right" valign="top" width="16%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">8,359,333</font></div>
            </td>
            <td align="right" valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 9pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">24.5%</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">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div>
        <hr style="COLOR: black" align="left" noshade size="1" width="100%">
      </div>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 9pt;">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1)&#160;&#160;&#160;
                </font></div>
            </td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Unless
                otherwise noted, the address for each of the named beneficial owners
                is:
                15632 Roxford Street, Sylmar, California 91342. Unless otherwise
                indicated, beneficial ownership is determined in accordance with
                Rule
                13d-3 promulgated under the Exchange Act and generally includes voting
                and/or investment power with respect to securities. Shares of common
                stock
                subject to options or warrants that are currently exercisable or
                exercisable within sixty days of the date of this offering memorandum
                are
                deemed to be beneficially owned by the person holding such options
                or
                warrants for the purpose of computing the percentage of ownership
                set
                forth in the above table, unless otherwise indicated.
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(2)&#160;&#160;&#160;
              </font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                calculations of percentage of beneficial ownership are based
                on&#160;30,992,004 shares of common stock outstanding as of May 12, 2006.
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(3)&#160;&#160;&#160;
              </font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Includes
                100,000 shares underlying options exercisable at $0.38 per share
                and
                828,000 shares underlying warrants exercisable at $1.25 per
                share.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(4)&#160;&#160;&#160;
              </font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Includes
                100,000 shares underlying options exercisable at $0.38 per share,
                892,000
                shares underlying warrants exercisable at $1.25 per share, and 700,000
                shares underlying warrants exercisable at $1.00 per share. Also includes
                1,046,184 common shares held by Lintz Family
                Trust.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>&#160;</div>
    <div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="line-height: 1.25;">
              <td align="left" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(5)&#160;&#160;&#160;
                </font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Includes
                  33,333 shares underlying options to purchase common
                  stock.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>&#160;</div>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(6)&#160;&#160;
              </font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Includes
                58,333 shares underlying options at&#160;$1.25 per
                share.&#160;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(7)&#160;&#160;
              </font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Includes
                200,000 shares underlying options exercisable at $0.38 per share.
                Also
                includes 225,000 shares underlying options at a price to be determined
                by
                the Board of Directors but likely to be $1.25 per
                share.</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">
      <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="line-height: 1.25;">
              <td align="left" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(8)&#160;&#160;
                </font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Includes
                  3,136,666 shares underlying options to purchase common
                  stock.</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><br></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">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">26</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </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><u>DIRECTORS
      AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>APPOINTMENT
      OF NEW OFFICERS AND DIRECTORS</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      connection with the Exchange Transaction, effective May 12, 2006, Ms. Morin
      resigned as Chief Executive Officer and sole Director of the Company,
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Effective&#160;May
      12, 2006, the Board of Directors, appointed Jeffrey Ungar as Chief Executive
      Officer and a Director, and George Lintz as Chief Financial Officer and a
      Director. The Board of Directors also appointed Merrill McPeak, Israel Ury
      and
      Robert Adams as new Directors on the Board.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      following tables summarizes the Company's current executive officers and
      directors and the proposed executive officers and directors of the Company:
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div>
        <hr style="COLOR: black" align="left" noshade size="1" width="100%">
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div>
      <table border="1" bordercolor="black" cellpadding="0" cellspacing="0" width="100%">

          <tr bgcolor="white">
            <td align="left" valign="bottom" width="17%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Name</strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td valign="bottom" width="8%">
              <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>Age</strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="47%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Position</strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Jeffrey
                Ungar</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td valign="top" width="8%" style="border-bottom: black thin solid;">
              <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">47</font></div>
            </td>
            <td align="left" valign="top" width="47%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Chief
                Executive Officer, Chairman of the Board, Co-Founder and
                Director</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">George
                Lintz</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td valign="top" width="8%" style="border-bottom: black thin solid;">
              <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">45</font></div>
            </td>
            <td align="left" valign="top" width="47%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Chief
                Financial Officer, Chief Operating Officer, Co-Founder and
                Director</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Israel
                Ury</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="top" width="8%" style="border-bottom: black thin solid;">
              <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">49</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="top" width="47%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Director</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Robert
                Adams</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="top" width="8%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font size="2">73</font></div>
            </td>
            <td align="left" valign="top" width="47%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Director</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Merrill
                A. McPeak</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="top" width="8%" style="border-bottom: black thin solid;">
              <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">70</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="top" width="47%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Director</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Thomas
                Stakelon</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td valign="top" width="8%" style="border-bottom: black thin solid;">
              <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">59</font></div>
            </td>
            <td align="left" valign="top" width="47%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Vice
                President, Engineering</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Paul
                Rudy</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td valign="top" width="8%" style="border-bottom: black thin solid;">
              <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">35</font></div>
            </td>
            <td align="left" valign="top" width="47%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Senior
                Vice President of Marketing and Sales</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Timothy
                Franey</font></div>
            </td>
            <td valign="top" width="8%" style="border-bottom: black thin solid;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font size="2">63</font></div>
              </div>
            </td>
            <td align="left" valign="top" width="47%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Vice
                President, Manufacturing</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</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="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Jeffrey
      Ungar, Ph.D., President, Chief Executive Officer, Co-Founder and
      Director</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Dr.
      Ungar
      started QPC in 2000 after a 17 year career at Ortel Corporation, a pioneer
      in
      the development of analog fiber optic technology for CATV. He joined Ortel
      in
      1983 as one of the first five employees, and stayed at Ortel until after its
      sale to Lucent Technologies in 2000 for approximately $2.95 billion. At Ortel,
      he occupied senior positions including Director of Advanced R&amp;D for
      Optoelectronic Devices and Director of Material and Structure Technologies.
      He
      holds a Ph.D. in Nuclear Physics from Caltech.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>George
      M. Lintz, M.B.A., Chief Financial Officer, Chief Operating Officer, Co-Founder
      and Director</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mr.
      Lintz
      started QPC along with Dr. Ungar in 2000 after a fifteen year career in
      investment banking. Mr. Lintz founded Lintz Glover White &amp; Company in 1987,
      an SEC registered, NASD member broker/dealer, and ran the Broker-Dealer until
      it
      was acquired in December 1999. During his tenure at Lintz Glover White, Mr.
      Lintz financed a number of early stage companies from the technology and finance
      industries. He founded and served as Chairman of G&amp;H Financial, a commercial
      finance lender from 1989 to 1994, in which capacity he provided asset-based
      financing for manufacturing companies. In 1994, Mr. Lintz was appointed by
      the
      California State Senate to serve as an advisor to their Local Government
      Investment Committee. As an advisor, he assisted in drafting the legislation
      that governs investment practices of state and local government entities in
      California. Mr. Lintz has been associated with various financial services firms
      on a part-time basis until July 2005. Mr. Lintz received his M.B.A. in Finance
      from New York University in 1984.</font></div>
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        </div>
      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">27</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
      </div>
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        </div>
      </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"><strong>Israel
      Ury, Director </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Dr.
      Ury
      has served as QPC&#8217;s Director since November 2001. From July 2001 to September
      2002, he also served as a director for Memlink, Inc. From February 2000 to
      July
      2001 he served as a Senior Technology Consultant for Lucent Technologies and
      Agere Systems. Dr. Ury founded and served as an executive officer of diode
      laser
      manufacturer, Ortel Corporation from 1980 to 2000. Dr. Ury received his B.S.
      and
      M.S. from the University of California at Los Angeles, and his Ph. D from
      California Institute of Technology.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Robert
      Adams, Director </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mr.
      Adams
      was appointed a director in May 2006. <font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mr.
      Adams
      began his career as an engineer at Bendix Aviation designing control systems
      for
      aircraft jet engines. He then designed ordnance systems as a non-commissioned
      army officer. After military service, he worked as a design engineer at Inland
      Steel Co. where he became involved in the use of computers to control steel
      making processes. He continued this interest as a control system designer at
      TRW/Bunker Ramo where he received several patents for multivariable control
      systems in the production of steel products.</font></font>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</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">In
        1969,
        Mr. Adams joined Xerox Corporation. At the time Mr. Adams was Vice President
        of
        Marketing at SDS responsible for planning and marketing of new technologies.
        In
        1975 he advanced within Xerox and managed a new business using computers
        to
        convert high-speed copiers into laser printers. This business alone has grown
        to
        over $6 billion in annual revenue. Mr. Adams was promoted from the President
        of
        Printing Systems to Group Vice President of the Xerox Systems Group (XSG)
        where
        he led the introduction of a number of new office products, some &#160;from
        Xerox PARC. At this time he sponsored a project to develop the first high-speed
        digital copier which under his guidance resulted in the development of
        high-quality, and high-speed digital scanners. Engineering of these products
        required the design of 13 application specific IC&#8217;s (ASIC&#8217;s) and other advance
        electronic design concepts. Mr. Adams was promoted to Executive Vice President
        in 1986 and moved to Xerox headquarters in Connecticut. In 1989 Mr. Adams
        began
        a venture capital activity on behalf of Xerox (Xerox Technology Ventures).
        XTV
        was completed in 1999. For the past five years, Mr. Adams has&#160;managed Adams
        Capital Management, a private investment company. Mr. Adams serves on the
        Board
        of Directors of Tekelec Corp. (NASDAQ-NMS: TKLC), a manufacturer of network
        switching products, and The Los Angeles Opera Company, a private corporation.
        Mr. Adams received a B.S. in Mechanical Engineering from Purdue University
        and
        an M.B.A. from the University of Chicago.&#160;He was awarded the Distinguished
        Engineering Alumnus in 1983 as well as the Outstanding Mechanical Engineer
        from
        Purdue. He was elected a Life Member of the President&#8217;s Council of the
        University of Chicago Graduate School of Business.</font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Merrill
      (&#8220;Tony&#8221;) McPeak, Director</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Gen.
      Merrill A. McPeak has served as the Vice-Chairman of our Board of Directors
      since January 2006. Gen. McPeak is President of McPeak and Associates, a
      management-consulting firm he founded in 1995. Gen. McPeak was Chief of Staff
      of
      the Air Force during the early 1990s. He entered the U.S. Air Force in November
      1957 and was a fighter pilot during his early years. He flew 269 combat missions
      in Vietnam. In 1967-68, he performed in nearly 200 official air shows as Solo
      Pilot for the USAF Aerial Demonstration Team, the &#8220;Thunderbirds.&#8221; He commanded
      NATO&#8217;s 20th Fighter Wing in 1980-81, Twelfth Air Force in 1987-88, Pacific Air
      Forces from 1988 to 1990, and was Chief of Staff of the Air Force from November
      1990 to October 1994, when he retired from active military service. General
      McPeak is Chairman of the Board of Ethicspoint, Inc. and a director of several
      other private companies. He is a director of the following public companies:
      Del
      Global Technologies (OTC: DGTC), a manufacturer and marketer of medical imaging
      systems; Gigabeam Corporation (OTC BB: GGBM), a supplier of high performance,
      high availability fiber-speed wireless communications; Health Sciences Group,
      Inc., (OTC BB: HESG), a provider of preventive healthcare alternatives; MathStar
      (NASDAQ-NMS: MATH), a designer and marketer of specialized semiconductor
      integrated circuits; and Tektronix, Inc. (NYSE: TEK), a manufacturer and
      marketer of test and measurement solutions.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
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        </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">28</font></div>
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        </div>
      </div>
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Thomas
      Stakelon, Ph.D., V.P. Engineering </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Dr.
      Stakelon serves as the VP of Engineering at QPC where he is responsible for
      managing the engineering resources that are delivering the Company's new
      products. Before joining QPC, he was Director of Engineering at Spectra-Physics,
      Inc. where he led development and reliability qualification of high power laser
      diode products for pumping solid state lasers, materials processing,
      telecommunications and other markets. During a long career at Agere Systems
      and
      Lucent Technologies, he successfully introduced important new optical products
      for telecommunications. Most recently, as President of LD Fiberoptics, he
      launched a small subsidiary of Agere's for the automated manufacture of passive
      optical components. Prior to this, he led teams developing new products and
      manufacturing processes for Lucent's' optoelectronics division. These included
      optical amplifiers, passive components, pump laser modules and low cost laser
      modules for terrestrial and undersea applications. He worked with other major
      companies on several joint product developments. While at Lucent, he focused
      on
      device packaging, product reliability and the customer technical interface.
      These efforts resulted in numerous design wins with substantial new revenue.
      He
      is responsible for numerous patents, publications and short courses. He holds
      an
      M.S and a Ph.D. in Physics from the University of Illinois. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Paul
      Rudy, Ph.D., Senior Vice President of Marketing and Sales </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Paul
      comes to QPC from an extensive career with Coherent, Inc. He served as Director
      of Marketing at Coherent Inc.&#8217;s Semiconductor Business Unit, leading the
      tactical and strategic marketing activities of the high power diode laser
      business, overseeing product management and developing strategies for the
      business unit&#8217;s technology, products, and markets. From 2000 through 2003, Dr.
      Rudy acted as Coherent&#8217;s Market Development Manager, responsible for developing
      and executing sales and tactical marketing strategies in the defense and
      graphics arts markets in North America. Prior to this, he acted as the Product
      Marketing Manager for Coherent Semiconductor Business Unit, focusing on
      unmounted bars and stacks. From 1997 to 1999, he was the Scientific Sales
      Engineer in the Mid-Atlantic region for Coherent Semiconductor Group and
      Coherent Laser Group. There, he developed several markets for Coherent Inc
      including the scientific market, enhanced imaging MRI, and defense applications.
      Prior to his position with Coherent Inc in the Mid-Atlantic, Dr. Rudy worked
      in
      the Advanced Technical Sales Group at Coherent, Inc. headquarters. He received
      his masters and doctoral degrees in physics studying laser manipulation of
      atoms
      at the University of Rochester and his B.S. and B.A. from Duke University in
      physics and philosophy. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Timothy
      Franey, V.P., Manufacturing</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mr.
      Franey was retained as the Vice President, Manufacturing in May 2006.
      Immediately prior to joining Target, Mr. Franey worked at JDS Uniphase from
      May
      2005 to March 2006, as a Senior Program Manager integrating the merger with
      Lightwave Electronics Corporation. Prior to that, Mr. Franey served as Vice
      President, Operations from May 1997 to May 2005 at Lightwave, an OEM
      Manufacturer of Diode Pumped Solid State Laser Products. Reporting to the Chief
      Executive Officer, Mr. Franey had global operational responsibilities for supply
      chain, IS/IT, quality, production, facilities and manufacturing engineering
      management. He holds two B.S. degrees in Electrical Engineering and Industrial
      Engineering from the University of Washington. He also holds an M.B.A. from
      Santa Clara University.</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: 10pt; FONT-FAMILY: Times New Roman"><strong><u>EXECUTIVE
      COMPENSATION</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">None
      of
      our executive officers received compensation in excess of $120,000 for the
      fiscal years ended December 31, 2005, 2004 or 2003, respectively. The following
      table summarizes all compensation received by our previous Chief Executive
      Officer, President and Chief Financial Officer in fiscal years 2005, 2004 and
      2003.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">29</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
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      </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>SUMMARY
      COMPENSATION TABLE</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="bottom" width="7%" style="border-bottom: #ffffff solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="middle" width="1%" style="border-bottom: #ffffff solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="4%" style="border-bottom: #ffffff solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="5%" style="border-bottom: #ffffff solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #ffffff solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="5%" style="border-bottom: #ffffff solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="10%" style="border-bottom: #ffffff solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td colspan="11" valign="bottom" width="35%" style="border-bottom: black thin solid;">
              <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>LONG
                TERM COMPENSATION</strong></font></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="7%" style="border-bottom: #ffffff solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
            </td>
            <td valign="middle" width="1%" style="border-bottom: #ffffff solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="1%" style="border-bottom: #ffffff solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="4%" style="border-bottom: #ffffff solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="1%" style="border-bottom: #ffffff solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="9" valign="bottom" width="26%" style="border-bottom: black thin solid;">
              <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>ANNUAL
                COMPENSATION</strong></font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td colspan="5" valign="bottom" width="20%" style="border-bottom: black thin solid;">
              <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>AWARDS</strong></font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td colspan="5" valign="bottom" width="14%" style="border-bottom: black thin solid;">
              <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>PAYOUTS</strong></font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="7%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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            <td valign="bottom" width="4%" style="border-bottom: black thin solid;">
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
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            <td valign="bottom" width="1%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
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              <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>Salary</strong></font></div>
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            <td valign="bottom" width="2%" style="border-bottom: white solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
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            <td valign="bottom" width="1%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
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            <td valign="bottom" width="5%" style="border-bottom: black thin solid;">
              <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>Bonus</strong></font></div>
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            </td>
            <td valign="bottom" width="1%" style="border-bottom: white solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="1%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="10%" style="border-bottom: black thin solid;">
              <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>Other</strong></font></div>
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            </td>
            <td valign="bottom" width="1%" style="border-bottom: white solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="1%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="8%" style="border-bottom: black thin solid;">
              <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>Restricted</strong></font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>($)</strong></font></div>
            </td>
            <td valign="bottom" width="1%" style="border-bottom: white solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="1%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Securities
                Underlying Options/SARs</strong></font></div>
            </td>
            <td valign="bottom" width="1%" style="border-bottom: white solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="1%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="5%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>LTIP
                Payout</strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>($)</strong></font></div>
            </td>
            <td valign="bottom" width="1%" style="border-bottom: white solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="1%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="7%" style="border-bottom: black thin solid;">
              <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>All
                Other Compen-sation</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: 10pt; FONT-FAMILY: Times New Roman"><strong>($)</strong></font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: white solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Julie
                Morin,</font></div>
            </td>
            <td align="left" valign="middle" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2005</font></div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
            </td>
            <td align="right" valign="bottom" width="5%">&#160;</td>
            <td align="left" valign="bottom" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Former
                CEO </font></div>
            </td>
            <td align="left" valign="middle" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2004</font></div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
            </td>
            <td align="right" valign="bottom" width="5%">&#160;</td>
            <td align="left" valign="bottom" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10,000</font></div>
              </div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">and
                CFO</font></div>
            </td>
            <td align="left" valign="middle" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2003</font></div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
            </td>
            <td align="right" valign="bottom" width="5%">&#160;</td>
            <td align="left" valign="bottom" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">_______________</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 cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1)</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
            </td>
            <td align="left" valign="top" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
                of December 31, 2005, Ms. Morin was the President, Chief Executive
                Officer
                and sole director of the Company. Ms. Morin has not received any
                payment
                for her position.</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"><strong>STOCK
      OPTION GRANTS AND EXERCISES</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For
      the
      fiscal year ended December 31 2005, and for each prior fiscal year, the Company
      did not issue any options or Stock Appreciation Rights to any officers,
      employees or directors.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>EMPLOYMENT
      AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS FOR
      QPC</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      currently have no employment agreements with any of our executive officers,
      nor
      any compensatory plans or arrangements resulting from the resignation,
      retirement or any other termination of any of our executive officers, from
      a
      change-in-control, or from a change in any executive officer's responsibilities
      following a change-in-control. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>COMPENSATION
      OF DIRECTORS </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">During
      the most recent fiscal year, our sole director, Julie Morin did not receive
      any
      compensation. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</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">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">30</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </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><u>CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS</u></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="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pursuant
      to a Loan Agreement, we issued a 10% secured promissory note in the principal
      amount of $200,000 to Jeffrey Ungar, our Chief Executive Officer, and another
      10% secured promissory note in the principal amount of $300,000 to George Lintz,
      our Chief Financial Officer on November 25, 2005 (collectively, as amended,
      the
&#8220;Bridge Notes&#8221; and Mr. Lintz and Mr. Ungar may be referred to as the &#8220;Bridge
      Noteholders&#8221;). The notes were due and payable on January 31, 2006. The lenders
      have a security interest in our cash, deposit accounts, fixed assets,
      intellectual properties, and certain insurance proceeds. This security interest
      is subordinated to our Senior Secured Promissory Notes originally issued on
      May
      21, 2004 and the Senior Subordinated Secured Promissory Notes dated as of
      September 30, 2005. We also paid a loan origination fee of 5% or, $10,000 and
      $15,000, to each of Mr. Ungar and Mr. Lintz, respectively. We also granted
      to
      each of Mr. Ungar and Mr. Lintz, a warrant to purchase 128,000 and 192,000
      shares of our common stock at $1.25 per share, respectively. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Effective
      as of January 25, 2006, we amended the Loan Agreement to mature on March 27,
      2006 instead of January 31, 2006. This maturity date is subject to the Company&#8217;s
      option&#160;to further extend the maturity date by another 30 days (&#8220;Extension
      Option&#8221;). In consideration of this amendment, the Company paid the Bridge
      Noteholders a loan origination fee of 3% of the original principal amount of
      the
      Notes (&#8220;3% Origination Fee&#8221;) or $15,000. The Company also issued warrants to
      purchase shares of Common Stock at $1.25 per share. The Company issued 60,000
      warrants for every $100,000 in principal loaned to the Company by the applicable
      Bridge Noteholder (&#8220;Bridge Warrants&#8221;). For every 30 day period beyond February
      24, 2006 that the Bridge Notes remain outstanding, the Company is obligated
      to
      issue another 60,000 Bridge Warrants for every $100,000 in principal
      outstanding. If the Company exercises the Extension Option, it shall pay the
      Bridge Noteholders an additional 3% Origination Fee and additional 60,000 Bridge
      Warrants for every $100,000 in principal outstanding. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">During
      2004, we issued $3,250,000 of notes payable to seven note holders, some of
      whom
      are our stockholders. One note holder who purchased $2,500,000 in principal
      is a
      partnership of which Mr. Lintz is an owner. The original term of the notes
      are
      24 months, bearing interest at 10% per annum, with no principal and interest
      payments required for the initial three months. The notes are secured by all
      of
      the assets of the Company, including its intellectual property. One warrant
      for
      every $1.33 of principal was granted to each note holder, with each warrant
      being convertible into one share of common stock at $3.75 per share. The
      warrants are immediately vested and have a six year term. During 2005, five
      of
      the seven note holders agreed to modify the terms of their notes. The
      modifications include deferring principal payments from April 2005 to March
      2006, thereafter principal payments will commence until the notes are fully
      paid
      in May 2007. In addition, 840,000 warrants were issued to the five note holders
      who elected to defer principal payments on their loans.</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: 10pt; FONT-FAMILY: Times New Roman"><strong><u>DESCRIPTION
      OF SECURITIES</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>GENERAL</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      Company&#8217;s Articles of Incorporation provide for authority to issue 180,000,000
      shares of Common Stock with a par value of $0.001 per Share. Immediately after
      the Closing, the capitalization of our Company consisted of&#160;30,992,004
      shares of Common Stock.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>COMMON
      STOCK </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      holders of the Common Stock are entitled to receive dividends when and as
      declared by the Board of Directors, out of funds legally available therefore.
      The Company has not paid cash dividends in the past and does not expect to
      pay
      any within the foreseeable future since any earnings are expected to be
      reinvested in the Company. In the event of liquidation, dissolution or winding
      up of the Company, either voluntarily or involuntarily, each outstanding share
      of the Common Stock is entitled to share equally in the Company's assets. Each
      outstanding share of the Common Stock is entitled to equal voting rights,
      consisting of one vote per share.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</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">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">31</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </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="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>MARKET
      PRICE OF AND DIVIDENDS ON COMMON EQUITY AND RELATED STOCKHOLDER
      MATTERS</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      common stock is not listed on any stock exchange. The common stock is traded
      over-the-counter on the Over-the-Counter Electronic Bulletin Board under the
      symbol "PLFC.OB". The following table sets forth the high and low bid
      information for the common stock for each quarter since the stock was first
      listed for trading in May 2005, as reported by the Over-the-Counter Electronic
      Bulletin Board. The bid prices reflect inter-dealer quotations, do not include
      retail markups, markdowns or commissions and do not necessarily reflect actual
      transactions.</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 border="1" bordercolor="black" cellpadding="0" cellspacing="0" width="100%">

          <tr bgcolor="white">
            <td align="left" valign="top" width="24%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">LOW</font></div>
            </td>
            <td valign="top" width="26%">
              <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">HIGH</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="24%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2006</font></div>
            </td>
            <td valign="top" width="23%">&#160;</td>
            <td valign="top" width="26%">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="24%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">First
                Quarter</font></div>
            </td>
            <td valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">*</font></div>
            </td>
            <td valign="top" width="26%">
              <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">*</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="24%">&#160;</td>
            <td valign="top" width="23%">&#160;</td>
            <td valign="top" width="26%">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="24%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2005</font></div>
            </td>
            <td align="left" valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="top" width="26%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="24%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Fourth
                Quarter</font></div>
            </td>
            <td valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">*</font></div>
            </td>
            <td valign="top" width="26%">
              <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">*</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="24%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Third
                Quarter</font></div>
            </td>
            <td valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">*</font></div>
            </td>
            <td valign="top" width="26%">
              <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">*</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="24%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Second
                Quarter</font></div>
            </td>
            <td valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">*</font></div>
            </td>
            <td valign="top" width="26%">
              <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">*</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">As
      of
      April 30, 2006, there were approximately 24 stockholders of record of our common
      stock. </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">*
      There
      have been no trades of Company common stock during such quarter.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>DIVIDENDS
      </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      have
      never paid any dividends on the Common Stock or the Preferred Stock. We
      currently anticipate that any future earnings will be retained for the
      development of our business and do not anticipate paying any dividends on the
      Common Stock or the Preferred Stock in the foreseeable future.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>TRANSFER
      AGENT</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      transfer agent is Holladay Stock Transfer and their address is 2939 North 67th
      Place, Scottsdale, Arizona, 85251. Their telephone number is
      480-481-3940.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>EQUITY
      COMPENSATION PLAN INFORMATION </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: 10pt; FONT-FAMILY: Times New Roman">The
      2006
      Stock Incentive Plan became effective on May 3, 2006 in connection with this
      transaction. All options to purchase stock of QPC which were outstanding at
      the
      time were assumed by us and converted into options to purchase shares of our
      common stock. The number of shares subject to each assumed and converted option
      was equal to the number of shares of common stock which were subject to that
      option immediately prior to the conversion, and the exercise price per share
      remained the same as the per share exercise price in effect under the option
      at
      the time of conversion. Except for the conversion of the securities subject
      to
      the options into shares of our common stock, each option will continue to be
      governed by the terms of the agreement evidencing that option at the time of
      our
      conversion into a corporation.</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: 10pt; FONT-FAMILY: Times New Roman">The
      2006
      Stock Incentive Plan permits issuance of restricted stock or stock
      options.&#160; At May 2006, only stock options are outstanding.&#160; Under the
      2006 Stock Incentive Plan restricted stock or options may be granted to
      employees, non-employee members of our Board of Directors, and consultants
      and
      other independent advisors in our employ or service. The number of shares of
      common stock issuable under the 2006 Stock Incentive Plan is 5,400,000 shares.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><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">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">32</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
      <div>&#160;</div>
    </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">Unvested&#160;options
      will vest on an accelerated basis in the event the Company is acquired and
      those
      options are not assumed or replaced by the acquiring entity. The options that
      were granted while we were a limited liability company, however, will terminate
      in the event the Company is acquired and those options are not assumed by the
      acquiring entity (unless their vesting is accelerated by our Compensation
      Committee). Each option will have a maximum term (not to exceed 10 years) set
      by
      the plan administrator (our Compensation Committee) at the time of grant,
      subject to earlier termination following the optionee&#8217;s cessation of employment.
      All options are non-statutory options under the Federal tax law, unless they
      are
      incentive stock options granted to employees.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>LEGAL
      PROCEEDINGS</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">From
      time
      to time, we may be involved in litigation or other business disputes including
      patent infringement, defamation and unfair competition. The Company&#8217;s management
      is not aware of any material legal proceedings pending against the Company.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">There
      have been no changes in or disagreements with the Company&#8217;s independent
      auditors. The Company engaged its independent auditors, Bagell Josephs, Levine
      &amp; Company, L.L.C. in December 2004. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>RECENT
      SALES OF UNREGISTERED SECURITIES</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pursuant
      to the Share Exchange Agreement entered by and among shareholders of
      Quintessence Photonics Corporation, a Delaware corporation (&#8220;Target&#8221;),
      shareholders of the Target (the &#8220;Target Shareholders&#8221;), on the one hand, and
      Julie Morin (the &#8220;QLI Shareholder&#8221;), and the Company on the other hand, the
      Company issued shares of the Company&#8217;s Common Stock (the &#8220;QLI Shares&#8221;) to the
      Target Shareholders in exchange for 98% of the common stock of Target. The
      QLI
      Shares equaled 87% of the outstanding shares of the Registrant&#8217;s common stock.
      The issuance of the QLI Shares to the Target Shareholders pursuant to the
      Exchange Agreement was exempt from registration under the Securities Act
      pursuant to Section 4(2) and/or Regulation D thereof. We made this determination
      based on the representations of the Target Shareholders which included, in
      pertinent part, that such shareholders were "accredited investors" within the
      meaning of Rule 501 of Regulation D promulgated under the Securities Act and
      that such shareholders were acquiring our common stock, for investment purposes
      for their own respective accounts and not as nominees or agents, and not with
      a
      view to the resale or distribution thereof, and that each person understood
      that
      the shares of our common stock may not be sold or otherwise disposed of without
      registration under the Securities Act or an applicable exemption therefrom.
      </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: 10pt; FONT-FAMILY: Times New Roman"><strong><u>INDEMNIFICATION
      OF DIRECTORS AND OFFICERS</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">No
      officer or Director of the Company shall be liable to the Company or its
      shareholders for the damages for the breach of a fiduciary duty as a Director
      or
      officer other than: (a) acts or omissions which involve intentional misconduct,
      fraud or a known violation of the law; or (b) the payment of dividends in
      violation of NRS 78.300.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</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">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">33</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company may purchase or maintain insurance or make other financial arrangements
      on behalf of any person who is or was a Director, officer, employee, or agent
      of
      the Company, or is or was serving at the request of the Company as a Director,
      officer, employee or agent of another corporation, partnership, joint venture,
      trust or other enterprise asserted against him in his capacity as Director,
      officer, employee or agent, or arising of his status as such, whether or not
      the
      Company has the authority to indemnify him against such liability or
      expense.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company shall indemnify all of its officers and Directors, past, present, and
      future against any and all expenses incurred by them, and each of them,
      including but not limited to, legal fees, judgments and penalties which may
      be
      incurred, rendered or levied in any legal action or administrative proceeding
      brought against them for any act or omission alleged to have been committed
      while acting within the scope of their duties as officers or Directors of the
      Company. The expenses of officers and Directors incurred and in advance of
      final
      disposition of the action or proceeding upon receipt of an undertaking by or
      on
      behalf of the officer or Director to repay the amount if it is ultimately
      determined by a court of competent jurisdiction that he/she is not entitled
      to
      be indemnified by the Company. Such right of indemnification shall not be
      exclusive of any other rights of indemnification, which the officers and
      Directors may have or hereafter acquire. Without limitation of the foregoing,
      the Board of Directors may adopt by-laws from time to time to provide the
      fullest indemnification permitted by the laws of the State of
      Nevada.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      3.02</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>UNREGISTERED
      SALES OF EQUITY SECURITIES</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pursuant
      to the Share Exchange Agreement entered by and among shareholders of
      Quintessence Photonics Corporation, a Delaware corporation (&#8220;Target&#8221;),
      shareholders of the Target (the &#8220;Target Shareholders&#8221;), on the one hand, and
      Julie Morin (the &#8220;QLI Shareholder&#8221;), and the Company on the other hand, the
      Company issued shares of the Company&#8217;s Common Stock (the &#8220;QLI Shares&#8221;) to the
      Target Shareholders in exchange for at least 98% of the common stock of Target.
      The QLI Shares equaled 87% of the outstanding shares of the Registrant&#8217;s common
      stock. The issuance of the QLI Shares to the Target Shareholders pursuant to
      the
      Exchange Agreement was exempt from registration under the Securities Act
      pursuant to Section 4(2) and/or Regulation D thereof. We made this determination
      based on the representations of the Target Shareholders which included, in
      pertinent part, that such shareholders were "accredited investors" within the
      meaning of Rule 501 of Regulation D promulgated under the Securities Act and
      that such shareholders were acquiring our common stock, for investment purposes
      for their own respective accounts and not as nominees or agents, and not with
      a
      view to the resale or distribution thereof, and that each person understood
      that
      the shares of our common stock may not be sold or otherwise disposed of without
      registration under the Securities Act or an applicable exemption therefrom.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      5.01</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>CHANGES
      IN CONTROL OF REGISTRANT</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Under
      the
      Exchange Agreement, on the Closing Date, the Registrant issued QLI Shares to
      the
      Target Shareholders in exchange at least 98% of the common stock of Target.
      On
      the Closing Date, the Registrant issued one QLI Share to the Target Shareholders
      in exchange for each Target Share. In addition, all options, warrants and
      convertible notes (&#8220;Derivative Security&#8221;) that may be exercised or converted
      into Target Shares shall be exchanged for Derivative Securities that may be
      exercised or converted into QLI Shares. The number of QLI Shares underlying
      the
      new QLI Derivative Security will equal the number of QLI Shares that would
      have
      been issued to the Target security holder, had he exercised or converted the
      Target Derivative Security into Target Shares immediately prior to the Closing.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      sole
      director of the Registrant and holder of a majority of QLI Shares has approved
      the Exchange Agreement and the transactions contemplated thereunder. Target&#8217;s
      directors and the Target Shareholders have approved the Exchange Agreement
      and
      the transactions contemplated thereunder (the &#8220;Exchange Transaction&#8221;). The
      holder of a majority of QLI Shares also sold 48,294,115 QLI Shares to the Target
      for $250,000. These shares have since been retired by Target.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
      a
      result of this transaction, the Target Shareholders acquired control of the
      Company because the QLI Shares entitle the Target Shareholders to hold 87%
      or
      the majority number of voting shares of the Company. As a result of this change
      in change in control, Julie Morin agreed to resign as the Company&#8217;s sole
      director, Chief Executive Officer and Chief Financial Officer. Further, prior
      to
      her resignation Morin , as the Company&#8217;s sole member of the Board of Directors
      (the &#8220;Board&#8221;), agreed to appoint Jeffrey Ungar as the Company&#8217;s new Chief
      Executive Officer, and George Lintz as the Company&#8217;s new Chief Financial
      Officer. In addition, the Board also appointed Jeffrey Ungar, George Lintz,
      Merrill McPeak, Israel Ury and Robert Adams as Directors.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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        </div>
      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
                5.02</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
            </td>
            <td align="left" valign="top" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="top" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>DEPARTURE
                OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT
                OF
                PRINCIPAL OFFICERS.</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</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"><strong>(a)</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Resignation
      Of Director</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Effective
      May 12, 2006, Julie Morin (&#8220;Morin&#8221;) resigned as the sole member of the board of
      directors of the Registrant. There were no disagreements between Morin and
      any
      officer or director of the Registrant. The Registrant provided a copy of the
      disclosures it is making in response to this Item 5.02 to Morin and informed
      her
      that she may furnish the Registrant as promptly as possible with a letter
      stating whether she agrees or disagrees with the disclosures made in response
      to
      this Item 5.02, and that if she disagrees, then the Registrant requests that
      she
      provide the respects in which she does not agree with the disclosures. The
      Registrant will file any letter received by the Registrant from Morin as an
      exhibit to an amendment to this current report on Form 8-K within two business
      days after receipt by the Registrant. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(b)</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Resignation
      Of Officers</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Effective
      May 12, 2006, Morin resigned as the Chief Executive Officer and Chief Financial
      Officer of the Registrant</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>.</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(c)</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Appointment
      of Directors</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Effective
      May 12, 2006, Jeffrey Ungar, George Lintz, Israel Ury, Merrill McPeak and Robert
      Adams were appointed as a members of the Registrant&#8217;s Board of
      Directors.</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">Descriptions
      of the newly appointed directors and officers can be found in Item 2.01 above,
      in the section titled &#8220;DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
      PERSONS.&#8221;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(d)</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Appointment
      of Chief Executive Officer and Chief Financial Officer</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Effective
      May 12, 2006, Mr. Jeffrey Ungar was appointed as Chief Executive Officer of
      the
      Registrant.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Effective
      May 12, 2006, Mr. George Lintz was appointed as the Chief Financial Officer
      of
      the Registrant.</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">Mr.
      Ungar
      and Mr. Lintz have no family relationships with any of the Company&#8217;s other
      executive officers or directors. Related party transactions involving Mr. Ungar
      and Mr. Lintz are described in Item 2.01 above.&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      5.03</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>AMENDMENTS
      TO ARTICLES OF INCORPORATION OR BYLAWS</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      connection with the Share Exchange Agreement the Company filed an amendment
      to
      its Articles of Incorporation increasing its authorized shares of common stock
      to 180,000,000 and changing the name of the Company from &#8220;Planning Force, Inc.&#8221;
to &#8220;QPC Lasers, Inc.&#8221; The Company also amended and restated its
      Bylaws.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><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">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">35</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </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"><strong>Item
      5.06</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>CHANGE
      IN SHELL COMPANY STATUS</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Under
      the
      Exchange Agreement, on the Closing Date, the Registrant issued QLI Shares to
      the
      Target Shareholders in exchange at least 98% of the common stock of Target.
      On
      the Closing Date, the Registrant issued one QLI Share to the Target Shareholders
      in exchange for each Target Share. In addition, all options, warrants and
      convertible notes (&#8220;Derivative Security&#8221;) that may be exercised or converted
      into Target Shares shall be exchanged for Derivative Securities that may be
      exercised or converted into QLI Shares. The number of QLI Shares underlying
      the
      new QLI Derivative Security will equal the number of QLI Shares that would
      have
      been issued to the Target security holder, had he exercised or converted the
      Target Derivative Security into Target Shares immediately prior to the Closing.
      As a result of the Exchange, Target shareholders owned 87% of QLI after the
      Closing Date.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      closing of this transaction (the &#8220;Closing&#8221;) occurred on May 12,
      2006.</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">Prior
      to
      the transaction, the Registrant was a company providing event and retreat
      planning services for corporate customers. Since inception in August 2004,
      this
      business has generated minimal revenue for the Registrant. From and after the
      Closing Date, the Registrant&#8217;s primary operations will now consist of the
      operations of Target.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      9.01&#160;&#160;&#160;&#160;FINANCIAL STATEMENT AND EXHIBITS.
</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(a)
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Financial
      Statements Of Businesses Acquired </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      financial statements of Target for the the years ended December 31, 2005 and
      December 31, 2004 are incorporated herein by reference to Exhibit 99.2 to this
      Current Report. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(b)
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Pro
      Forma Financial Statements</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</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">Our
      unaudited pro forma combined financial statements as of and for the year ended
      December 31, 2005 are incorporated herein by reference to Exhibit 99.3 to this
      Current Report. </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">Our
      unaudited pro forma combined balance sheet as of December 31, 2005 and our
      unaudited pro forma combined statement of operations for the year ended December
      31, 2005 are incorporated herein by reference to Exhibit 99.3 to this Current
      Report, and are based on the historical financial statements of us and Target
      after giving effect to the Exchange Transaction. In accordance with Statement
      of
      Financial Accounting Standards No. 141, "Business Combinations" (SFAS 141),
      and
      the assumptions and adjustments described in the accompanying notes to the
      unaudited pro forma combined condensed financial statements, Target is
      considered the accounting acquiror. The Exchange Transaction was completed
      on
      May 12, 2006. Because Target's owners as a group retained or received the larger
      portion of the voting rights in the combined entity and Target's senior
      management represents a majority of the senior management of the combined
      entity, Target was considered the acquiror for accounting purposes and will
      account for the Exchange Transaction as a reverse acquisition. The acquisition
      will be accounted for as the recapitalization of Target since, at the time
      of
      the acquisition, the development of our hardware product and the sales of our
      software product generated minimal revenues. Our fiscal year will end on
      December 31.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      unaudited pro forma combined balance sheet as of December 31, 2005 is presented
      to give effect to the Exchange Transaction as if it occurred on January 1,
      2005
      and combines the historical balance sheet of Target at December 31, 2005 and
      the
      historical balance sheet of QPC Lasers, Inc. at December 31, 2005. The unaudited
      pro forma combined statement of operations of Target and QPC Lasers, Inc. for
      the year ended December 31, 2005 is presented as if the combination had taken
      place on January 1, 2005. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">36</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </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">Reclassifications
      have been made to QLI&#8217;s historical financial statements to conform to Target's
      historical financial statement presentation. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; 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
      unaudited pro forma combined condensed financial statements should be read
      in
      conjunction with "Management's Discussion and Analysis of Financial Condition
      and Results of Operations" and the historical consolidated financial statements
      and accompanying notes of Target&#8217;s and QPC Lasers, Inc. The unaudited pro forma
      combined condensed financial statements are not intended to represent or be
      indicative of our consolidated results of operations or financial condition
      that
      would have been reported had the Exchange Transaction been completed as of
      the
      dates presented, and should not be taken as representative of the future
      consolidated results of operations or financial condition of the Registrant.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(c)</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>INDEX
      TO EXHIBITS.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr bgcolor="white">
            <td valign="bottom" width="6%" style="border-bottom: black thin solid;">
              <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>Exhibit
                Number</strong></font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: white solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;&#160;</font></div>
            </td>
            <td align="left" valign="bottom" width="64%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Description</strong></font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.1</font></div>
            </td>
            <td align="left" valign="bottom" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="64%">
              <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: 10pt; FONT-FAMILY: Times New Roman">Share
                Exchange Agreement by and among Quintessence Photonics Corporation
                (&#8220;Target&#8221;), QPC Lasers, Inc., the shareholders of Target, and Julie Morin
                dated May 12, 2006 (1)</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.1</font></div>
            </td>
            <td align="left" valign="bottom" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="64%">
              <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: 10pt; FONT-FAMILY: Times New Roman">Articles
                of Incorporation of QPC Lasers, Inc. as filed with the State of Nevada,
                as
                amended. (1) (2)</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.2</font></div>
            </td>
            <td align="left" valign="bottom" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="64%">
              <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: 10pt; FONT-FAMILY: Times New Roman">Amended
                and Restated Bylaws of QPC Lasers, Inc. (1)</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="6%">
              <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">99.1</font></div>
            </td>
            <td align="left" valign="bottom" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="64%">
              <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: 10pt; FONT-FAMILY: Times New Roman">Director&#8217;s
                and Officer&#8217;s Letter of Resignation by Ms. Julie Morin to the Board of
                Directors of QPC Lasers, Inc. (1)</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="top" width="6%">
              <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">99.2</font></div>
            </td>
            <td align="left" valign="bottom" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="64%">
              <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: 10pt; FONT-FAMILY: Times New Roman">Financial
                statements of Target for the years ended December 31, 2005 and December
                31, 2004.(1)</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="6%">
              <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">99.3</font></div>
            </td>
            <td align="left" valign="bottom" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="64%">
              <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: 10pt; FONT-FAMILY: Times New Roman">Unaudited
                pro forma condensed financial statements of QPC Lasers, Inc., as
                of and
                for the fiscal year ended December 31, 2005 and unaudited pro forma
                Statement of Operations for the fiscal year ended December 31, 2005.
                (1)</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">______________</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1)</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
            </td>
            <td align="left" valign="top" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Filed
                herewith.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(2)</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
            </td>
            <td align="left" valign="top" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Incorporated
                by reference from the Registrant&#8217;s Registration Statement on Form SB-2, as
                amended.</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">&#160;</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">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">37</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
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    <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>SIGNATURES
      </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Registrant
      has
      duly caused this Report to be signed on its behalf by the undersigned hereunto
      duly authorized. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="top" width="34%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="35%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Date:
                May 12, 2006</font></div>
            </td>
            <td align="left" colspan="2" valign="top" width="37%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>QPC
                Lasers, Inc.</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="35%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="top" width="34%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="35%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:&#160;&#160;</font></div>
            </td>
            <td align="left" valign="top" width="34%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">/s/
                George Lintz</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" colspan="2" valign="top" width="38%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="top" width="34%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
                <hr style="COLOR: black" align="left" noshade size="2" width="80%">
              </div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">George
                Lintz</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" colspan="2" valign="top" width="38%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="top" width="34%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Chief
                Financial Officer</font></div>
            </td>
          </tr>

      </table>
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{"company-data": {"conformed-name": "QPC Lasers", "cik": "0001310753", "assigned-sic": "7380", "irs-number": "201568015", "state-of-incorporation": "NV", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "333-121598", "film-number": "06836101"}, "business-address": {"street1": "703 E 27TH AVE", "city": "SPOKANE", "state": "WA", "zip": "99203", "phone": "509-749-2064"}, "mail-address": {"street1": "703 E 27TH AVE", "city": "SPOKANE", "state": "WA", "zip": "99203"}, "former-company": {"former-conformed-name": "Planning Force, Inc.", "date-changed": "20041206"}}
UNITED
      STATES
SECURITIES
      AND EXCHANGE COMMISSION
WASHINGTON,
      D.C. 20549
FORM
      8-K
CURRENT
      REPORT
Pursuant
      to Section 13 or 15(d) of the
Securities
      Exchange Act of 1934
Date
      of report (Date of earliest event reported): May 12, 2006
QPC
      LASERS, INC.
(Exact
      name of registrant as specified in charter)
(formerly
      known as Planning Force, Inc.)
Nevada
000-28153
20-1568015
(State
                or other jurisdiction of
incorporation
                or organization)
(Commission
                File No.)
(IRS
                Employee Identification
                No.)
15632
      Roxford Street
Sylmar,
      California 91342
(Address
      of Principal Executive Offices)
(818)
      986-0000
(Issuer
      Telephone number)
Check
      the
      appropriate box below if the Form 8-K filing is intended to simultaneously
      satisfy the filing obligation of the registrant under any of the following
      provisions (see General Instruction A.2. below):
[ 
      ]    Written communications pursuant to Rule 425 under the
      Securities Act (17 CFR 230.425)
[ 
      ]    Soliciting material pursuant to Rule 14a-12(b) under the
      Exchange Act (17 CFR 240.14a-12(b))
[ 
      ]    Pre-commencement communications pursuant to Rule 14d-2(b)
      under the Exchange Act (17 CFR 240.14d-2(b))
[ 
      ]    Pre-commencement communications pursuant to Rule 13e-4(c)
      under the Exchange Act (17 CFR 240.13e-4(c))
1
Forward
      Looking Statements
This
      Form
      8-K and other reports filed by Registrant from time to time with the Securities
      and Exchange Commission (collectively the "Filings") contain or may contain
      forward looking statements and information that are based upon beliefs of,
      and
      information currently available to, Registrant's management as well as estimates
      and assumptions made by Registrant's management. When used in the filings the
      words "anticipate", "believe", "estimate", "expect", "future", "intend", "plan"
or the negative of these terms and similar expressions as they relate to
      Registrant or Registrant's management identify forward looking statements. Such
      statements reflect the current view of Registrant with respect to future events
      and are subject to risks, uncertainties, assumptions and other factors
      (including the risks contained in the section of this report entitled "Risk
      Factors") relating to Registrant's industry, Registrant's operations and results
      of operations and any businesses that may be acquired by Registrant. Should
      one
      or more of these risks or uncertainties materialize, or should the underlying
      assumptions prove incorrect, actual results may differ significantly from those
      anticipated, believed, estimated, expected, intended or planned.
Although
      Registrant believes that the expectations reflected in the forward looking
      statements are reasonable, Registrant cannot guarantee future results, levels
      of
      activity, performance or achievements. Except as required by applicable law,
      including the securities laws of the United States, Registrant does not intend
      to update any of the forward-looking statements to conform these statements
      to
      actual results. The following discussion should be read in conjunction with
      Registrant's pro forma financial statements and the related notes that will be
      filed herein.
Item
      1.01 Entry into a Material Definitive Agreement.
As
      more
      fully described in Item 2.01 below, on May 12, 2006, QPC Lasers, Inc. (the
      "Registrant" or "QLI") executed a Share Exchange Agreement ("Exchange
      Agreement") by and among Julie Morin (referred to as the "Majority Shareholder")
      and the Registrant on the one hand, and Quintessence Photonics Corporation,
      a
      Delaware corporation ("Target" or "QPC"), and the shareholders of substantially
      all of Target's common stock (the "Target Shareholders") on the other hand.
      Under the Exchange Agreement, on the Closing Date, the Registrant issued one
      share of the Registrant's Common Stock (the "QLI Shares") to the Target
      Shareholders in exchange for each share of Target common stock and issued an
      aggregate of 26,986,119 QLI Shares ("Target Shares"). In addition, all
      options, warrants and convertible notes ("Derivative Security") that may be
      exercised or converted into Target Shares shall be exchanged for Derivative
      Securities that may be exercised or converted into QLI Shares. The number of
      QLI
      Shares underlying the new QLI Derivative Security will equal the number of
      QLI
      Shares that would have been issued to the Target security holder, had he
      exercised or converted the Target Derivative Security into Target Shares
      immediately prior to the Closing. Pursuant to the Exchange Agreement, QLI issued
      options, warrants or convertible notes that may be exercised or converted,
      as
      the case may be, into 10,776,879 QLI Shares.
The
      QLI
      Shares issued at closing shall equal at least 87% of the outstanding shares
      of
      the Registrant's common stock. In addition, on the Closing Date, Target will
      purchase 48,294,115 QLI Shares from Julie Morin for $250,000. Target has since
      retired these 48,294,115 shares.
The
      closing of this transaction (the "Closing") occurred on May 12, 2006 (the
"Closing Date").
2
Item
      2.01 Acquisition or Disposition of Assets
Under
      the
      Exchange Agreement, on the Closing Date, the Registrant issued QLI Shares to
      the
      Target Shareholders in exchange for at least 98% of the capital stock of Target.
      The Registrant issued one QLI Share to the Target Shareholders in exchange
      for
      every Target Share. In total, the Registrant issued 26,986,119 QLI Shares
      to Target Shareholders. In addition, all options, warrants and convertible
      notes
      ("Derivative Securities") that may be exercised or converted into Target Shares
      were exchanged for Derivative Securities that may be exercised or converted
      into
      QLI Shares. The number of QLI Shares underlying the new QLI Derivative Security
      will equal the number of QLI Shares that would have been issued to the Target
      security holder, had such holder exercised or converted the Target Derivative
      Security into Target Shares immediately prior to the Closing. As a result of
      the
      Exchange, Target shareholders owned 87% of QLI after the Closing
      Date.
In
      addition, on the Closing Date, Target will purchase 48,294,115 QLI Shares from
      Julie Morin for $250,000 in cash. Target has since retired these 48,294,115
      shares.
The
      acquisition will be accounted for as a reverse merger (recapitalization) with
      QPC deemed to be the accounting acquirer and QLI deemed to be the legal
      acquirer.
The
      parties' completion of the transactions contemplated under the Exchange
      Agreement (the "Closing") were subject to the satisfaction of certain
      contingencies including, without limitation, the lack of breach of any
      representations and warranties and performance of certain covenants
.
The
      directors of the Registrant and holders of a majority of QLI Shares have
      approved the Exchange Agreement and the transactions contemplated thereunder.
      Target's directors and the Target Shareholders have approved the Exchange
      Agreement and the transactions contemplated thereunder (the "Exchange
      Transaction").
The
      closing of this transaction (the "Closing") occurred on May 12, 2006 (the
"Closing Date").
Prior
      to
      the transaction, the Registrant was a company providing event and retreat
      planning services for corporate customers. Since inception in August 2004,
      this
      business has generated minimal revenue for the Registrant. From and after the
      Closing Date, the Registrant's primary operations will now consist of the
      operations of Target.
In
      this
      report, when we use phrases such as "we," "our," "company," "us," we are
      referring to QPC Lasers, Inc. and Target as a combined entity.
DESCRIPTION
      OF BUSINESS
Target
      was founded in November 2000 with backing from strategic and venture capital
      investors to design and manufacture next-generation, high performance
      semiconductor lasers and associated optical components. Our proprietary
      technology platform was developed by a staff that includes ten Ph.D.s as well
      as
      other eminent scientists and engineers in the field of high-powered lasers.
      Our
      intellectual property consists of 16 patents (three issued and 13 pending)
      as
      well as trade secrets, and is expected to, over the next 12 to 24 months, enable
      QPC to introduce high performance, low-cost lasers to address a multi-billion
      dollar global marketplace.
Overview
We
      design
      and manufacture next-generation high brightness lasers for a variety of
      commercial and military purposes. We believe our technology platform will enable
      us to replace or improve legacy laser technologies embedded in the manufacturing
      infrastructure of the industrialized world, and could enable the widespread
      deployment of directed energy weapons and infrared countermeasures for use
      in
      defense and homeland security.
With
      the
      collaboration of our 13 senior staff level laser scientists, including ten
      Ph.D.s, we have developed multiple breakthrough technologies, with each
      representing large-scale commercial potential and when taken together constitute
      a unique and broad portfolio of intellectual property. We have a number of
      important technologies that address different issues of laser performance.
      Specifically, we believe we have technology for the industry's highest
      brightness diode lasers for "pumping," the highest beam quality for focus
      on a tight spot, the highest optical power density, the most robust and precise
      wavelength control, the highest efficiency, and the world's most
      advanced technology for mid-infrared diode lasers, for homeland security
      and defense applications.
We
      believe we have also produced the world's only monolithic surface emitting
      arrays, wherein we may aggregate hundreds of high power lasers onto a
      single semiconductor chip. This development is analogous to the advancement
      from
      the transistor to the integrated circuit, or from the mainframe to the personal
      computer. It allows us to reproduce lasers in high volume, assemble them
      inexpensively, and create a finished product that is easy to cool and possesses
      high power density.
We
      have
      designed and are developing, subject to additional funding, the world's only
      on-chip wavelength "conversion" (shortening or lengthening wavelengths beyond
      conventional ranges for diode lasers) and control. This technology is
      capable of generating wavelengths for detecting pollution, hazardous
      materials and chemical explosives; it also is conducive to establishing
      effective countermeasures for heat-seeking missiles. We have industry
      leading eye-safe laser technology for producing a "directed energy weapons"
arsenal for the U. S. military, and for the creation of eye-safe laser products
      for surgery, hair, tattoo and acne removal, and other commercial
      applications.
Target
      was founded in 2000 by Dr. Jeffrey Ungar, a Caltech scientist and former head
      of
      Advanced R & D at Ortel, and George Lintz, MBA an entrepreneur with fifteen
      years of investment banking and finance industry experience. Under their
      administration, QPC has built a staff of more than 26 employees, including
      prominent scientists and engineers. By 2002, we had created a state-of-the-art
      production facility that covers 18,000 square feet and allows us to conduct
      nearly all of our operations on site, including R&D, semiconductor wafer
      fabrication, processing and packaging. In its present configuration, our plant
      has the capacity to produce three million devices per year and it is scalable
      to
      an estimated 20 million devices.
In
      the
      same year, we also produced the "first light" from our laser devices and
      procured our initial government contracts. In 2003, we phased in these
      government contracts and focused on product development for industrial, medical
      and defense purposes. In 2004, we initiated our first commercial shipments
      of
      Generation I devices and in 2005, we introduced and began to market Generation
      II products, hired worldwide sales representatives and attracted several OEM
      orders.
Since
      our
      inception, we have received over $2.8 million of development contracts from
      the
      United States Navy, United States Army, United States Missile Defense Agency,
      prime defense contractors in the United States and Israel. Furthermore, we
      have
      raised approximately $29.5 million in four separate rounds of equity financing.
Industry
      Overview
By
      1954,
      physicist Charles Townes had spent $30,000 in government funds developing the
      maser, the precursor to the laser. Today, lasers constitute a multi-billion
      dollar industry. From laser surgery to CD players and grocery-store checkout
      scanners, daily living is enhanced by a basic discovery that was originally
      thought by some to have no practical uses. The diversity of laser types and
      applications continues to grow through research conducted at university,
      industrial and federal labs.
"LASER"
      is an acronym of light amplification by stimulated emission of radiation. A
      laser converts electricity into light and delivers a large amount of energy
      to a
      small, designated area. In general, there are three main types of commercial
      lasers: gas, solid-state and semiconductor (or "diode"). The major difference
      between a laser and any other sort of light source, such as a light bulb, is
      that a laser is focused and directed. In the case of a light bulb, there is
      a
      hot cylinder at the core and it distributes light in many different directions
      and in a range of colors, or wavelengths. Thus, light bulbs are very useful
      in
      illuminating large areas but they are essentially useless in directing energy
      to
      a small area. On the other hand, lasers are well suited to concentrating energy
      in a small area because the beam quality (a measure of how directional the
      beam
      is) is significantly higher. Furthermore, lasers produce light at essentially
      the exact desired color (wavelength) or a very closely banded range of
      colors.
3
With
      recent advances in technology, the diode laser—our core product—is becoming
      dominant in the several markets that rely on low power lasers. In fact, in
      the
      telecommunications and optical fiber industries, diode lasers have become the
      standard and have virtually replaced all other types. However, with respect
      to
      most industrial applications, such as plastics welding, metal welding,
      soldering, surface hardening and coarse marking, gas lasers remain dominant
      because high-powered diode lasers, prior to our technology breakthroughs, have
      been unable to be focused down into a tight spot. Or in technical parlance,
      they
      lack the required "brightness."
The
      Gas Laser
The
      gas
      laser was one of the first lasers to find practical application. Generally,
      the
      pumping mechanism is an electric discharge, although some high-power forms
      employ chemical reactions or gas compression. The helium-neon, argon-ion and
      carbon dioxide lasers are examples of gas lasers. With gas lasers, ownership
      costs are high and they are at a competitive disadvantage. They are expensive
      to
      purchase, occupy large amounts of floor space, have low efficiency
      rates—consuming approximately 100 times as much energy as they emit—and require
      vast cooling systems to handle the excess heat that is wasted in the process.
      Their principal attribute is they produce a beam of good quality, or brightness.
The
      Solid-State Laser
This
      class of laser utilizes a transparent substance (crystalline or glass) as the
      active medium, doped to provide the energy states necessary for lasing. The
      pumping mechanism is the radiation from a powerful light source, such as a
      flash
      lamp. The ruby and Nd:YAG lasers are solid-state lasers.
High
      power solid-state units are still expensive and large (the size of a minivan).
      They have low (but higher than gas lasers) efficiency rates in the 1 to 5%
      range, which means that only a fraction of the power used in the process is
      actually transmitted to the laser while the balance is wasted, as heat. As
      a
      result, solid-state lasers require significant cooling infrastructure.
      Solid-state lasers, as is the case with gas lasers, offer good beam quality.
      In
      addition, solid-state lasers may be made more efficient with diode pumps.
The
      Semiconductor (or Diode) Laser
This
      category of laser converts electricity directly into light in a semiconductor
      chip without any other medium (such as gas or a crystal). The diode is designed
      to use stimulated emission to form a coherent light output. Semiconductor lasers
      are compact, affordable and highly efficient, and may be manufactured in large
      quantities. Typically, diodes successfully convert over 50% of the electric
      power source into the laser beam. Their major disadvantage is they generate
      low
      beam quality, or they lack brightness.
The
      QPC Diode Laser
We
      believe that QPC has unique high power laser diode technology platforms that
      combine high beam quality and power with high efficiencies and low cost of
      manufacture unmatched by competing laser technology. These platforms (see
"Technology Platform" section) include a "Surface Emitting Array" technology
      that permits fabrication of complete high power arrays on a single chip, novel
      processes for fabricating diodes that are intended to operate at 300% of the
      power of conventional chips without burning out, and laser diode designs that
      have ten times (10x) the brightness of conventional diode lasers. These
      technologies are protected by patents and by trade secrets, as
      appropriate.
Using
      these technologies, we are developing breakthrough Generation III direct-diode
      laser subsystems that may yield factor-of-ten improvements in size, weight,
      efficiency and cost over conventional solid-state lasers. The following table
      illustrates the commercially significant advantages that our Generation III
      (prototypes expected to be released in the fourth quarter of 2006) laser has
      over the solid state, which is embedded in the global manufacturing
      infrastructure.
4
QPC's
      Comparison of Gas/Solid State Lasers with Generation III QPC
      Laser*
Gas/Solid
                State Laser
QPC
                Direct-Diode
Power
                Output:
Two
                kilowatts
Two
                kilowatts
Size:
2.0
                cubic meters
0.1
                cubic meters
Weight:
2000
                kilograms
less
                than 250 kilograms
Power Consumption:
30
                to 60 kilowatts
3
                to 5 kilowatts
Price:
$500,000
                to $1,000,000
$50,000
                to $100,000
*
      Based
      on preliminary prototype designs of the Generation III QPC Direct Diode
      Laser
Product
      Offerings and Applications
Through
      our research & development efforts, we believe we haved improved upon the
      disadvantages of incumbent technology: high cost of acquisition and operation,
      large size and enormous weight, inefficiency in the use of electric power,
      and
      low brightness. We intend to launch our product offerings in three distinct
      phases. Our Generation I offerings, released in 2004, are currently available
      to
      the pumping, industrial, defense and medical markets. They are designed to
      establish market presence and garner immediate revenues by being superior in
      terms of cost, reliability, efficiency and power brightness. Generation I
      products include single emitters, mounted and unmounted bars covering
      wavelengths from 800 nanometers (nm) to 1,500nm and power levels ranging from
      2.5 W (single stripe) to 50 W (25 element array). These products are currently
      in qualification at 25 customers including defense contractors, industrial laser
      system manufacturers, and medical laser manufacturers. Repeat and/or production
      quantity orders have been received from several customers.
We
      recently released four of our Generation II products for sale in January 2006.
      These products deploy our unique chip technology and offer enhanced brightness
      over the first generation products. Generation II products are under purchase
      orders from multiple customers including defense contractors, medical device
      companies, research institutions and industrial companies. We believe that
      our
      Generation II products include two significant advantages over other available
      diodes: (1) our non-absorbing mirror technology generates significantly higher
      power without causing catastrophic optical damage ("COD"); and (2) our internal
      gratings enable our customers to specify exact, desired wavelength within +/-
      0.5 nanometers. Internal gratings eliminate the requirement for customers to
      cool or heat their diodes to achieve a specified wavelength. We believe that
      no
      other diode manufacturer has technology that can compete with these two QPC
      advantages and we have obtained commercial and government contracts to support
      the further development of these products.
With
      respect to longer-term Generation III products designed to combine surface
      emitting and extreme brightness technologies, development contracts have been
      received from various areas of the United States Department of Defense. We
      are
      on schedule to release Generation III prototypes in the fourth quarter of 2006.
      With these products it is our intention to penetrate the multi-billion dollar
      solid-state and gas laser markets—particularly industrial welding—by replacing
      them with powerful and inexpensive Generation III diode solutions. In addition,
      we believe that this class of products will establish new markets in homeland
      security and defense, such as directed energy weapons, that are low cost, small,
      light, rugged and efficient.
5
Product
      Applications
The
      following are examples of applications of our laser products. All of these
      markets may be addressed by our Generation I and/or II products, except
"Materials Processing," and certain Homeland Security applications which we
      believe will be addressed by our Generation III products.
Laser
      Pumping
Presently,
      the most common application of semiconductor lasers is "pumping" (or energizing)
      other lasers. In diode pumped laser architectures, the semiconductor laser
      light
"pumps" or energizes the gain medium that is configured inside its own laser
      cavity. The pump light is absorbed by the crystal or fiber, and a solid state
      or
      fiber laser is created. Diode pumping has significant advantages over
      traditional approaches that utilize lamps as pumps. In fact, nearly every
      important parameter of a laser system is improved with diode pumped
      architectures: system size, weight, performance, beam quality, waste heat
      (efficiency), complexity and cost of ownership.
Defense
      and Homeland Security
Because
      of their compact size, light weight and ruggedness, semiconductor lasers are
      ideal for military and aerospace applications. Used directly or as pumps for
      other lasers, semiconductor lasers are introduced in a wide variety of
      applications including the transmission of optical energy to a target and
      receiving a portion of it back in order to remotely measure various physical
      properties of the target. QPC's technology is enabling diode lasers to be used
      directly in applications where traditional lasers have been an imperfect
      solution, i.e., countermeasures, target designation and laser weapons.
Defense
      lasers that transmit energy to the target are common at both low and high power
      levels. On the low power end (less than 500 milliwatts), direct diode lasers
      are
      used for free-space communications for line of sight transmission. Laser
      communication is preferable to radio frequency (RF) communication because RF
      signals identify the location of the transmitter and can be easily intercepted.
      On the other hand, laser communications cannot be detected unless the
      eavesdropper is in the exact line of the laser beam, between the transmitter
      and
      the receiver,
and
knows
      the exact wavelength to seek. The drawback of free-space laser communications
      is
      that fog and battlefield smoke can interfere with the signal. With QPC's
      mid-infrared wavelength capabilities, it is possible to penetrate fog and smoke
      more than 10,000 times better than traditional near infrared wavelengths. At
      slightly higher power, direct diode lasers are used to initiate ordinances.
      For
      even higher powers and long wavelengths, diode lasers can be used directly
      (or
      through pumped solid-state lasers) to disable incoming heat-seeking missiles.
      At
      the highest power levels of 50 to 100 kilowatts, and eventually megawatts,
      high
      energy lasers for tactical weapons are being developed. The lasers can be
      deployed by land, sea and air in the years to come.
Another
      class of defense laser is one that is used to extract information from a target.
      At the low power end, for example, range-finding lasers allow users to measure
      distance and illuminators allow the user to view unprecedented levels of detail.
      At the higher power, remote sensing and LIDAR lasers allow the user to detect
      bio-chemical agents, clear air turbulence and other atmospheric conditions.
      Target designation lasers are used to remotely point to a target and they are
      particularly useful for non-stationary targets.
Materials
      Processing
Laser
      materials processing is one of the world's largest laser markets, with
      applications ranging from metal cutting and welding at the high power levels,
      to
      marking and plastics welding at low powers. Diode lasers are ideal for materials
      processing because of their high efficiency and compact size compared to
      conventional gas and solid-state laser solutions. Using our high brightness
      diode lasers, a large number of applications including marking, cutting of
      non-metals and metals, and metal welding will be improved.
6
Medical
      Treatment
At
      present, a variety of medical applications utilize diode lasers as either pump
      lasers or as direct diode treatment because of their compact size, efficiency,
      low cost and ability to produce large optical energies. Hair removal, dental,
      ophthalmic and other dermatological applications utilize diode laser light
      directly. The wavelength of the light is critical to the treatment efficacy
      and
      the laser source is selected to match the absorption lines of various skin,
      blood or organ constituents, or that of an injected dye. In many cases, the
      light is delivered through a fiber by way of a catheter or scope that needs
      to
      be extremely small, resulting in the need for high brightness fiber coupled
      with
      diode lasers.
Scientific
      Research
Spectroscopy
      and atomic physics typically require that semiconductor lasers be carefully
      designed to match the wavelength, spectral width and output power requirements
      of the atom or molecule being manipulated or examined. By illuminating a sample
      with the proper wavelength of laser light, one can determine the constituents,
      deliver energy to the sample in order to induce or control chemical reactions,
      heat and or cool, and even physically manipulate the sample.
Medical
      Imaging
Medical
      imaging is also an important emerging application of diode lasers. Traditional
      MRI technologies utilize the inherent electro-magnetic dipole associated with
      the water molecules to produce images within the human body. However, several
      organs such as the lungs and brain, are difficult to image effectively because
      of their relative lack of water. In order to dramatically enhance magnetic
      resonance imaging in these applications, diode lasers are used to produce a
      vapor that is delivered into the intended area of imaging. The inert gas does
      not react with the organ that is being imaged, but its presence allows the
      MRI
      to produce images with significantly higher resolution and contrast than an
      ordinary MRI.
With
      respect to other potential applications beyond medical imaging, research is
      being conducted to use technology advances to evaluate the structural integrity
      of bridges and buildings, and in searching for oil.
Printing,
      Graphic Arts & Display
High
      power semiconductor lasers are used in the printing process for a wide variety
      of print media including magazines, posters and newspapers. The most common
      application is thermal computer-to-plate imaging in which diode lasers are
      used
      to write printing plates. Our high brightness semiconductor laser technology
      is
      also creating a broader range of printing applications such as flexography
      and
      eventually on-press imaging.
Thermal
      computer-to-plate imaging has significant advantages over traditional analog
      film and plate technology, both of which use UV lamps. The elimination of film
      from the workflow dramatically reduces the start-up time for printers and allows
      them more flexibility in getting jobs on and off the press. Additionally, the
      thermal computer-to-plate process allows the user to work in white light, versus
      a dark environment. Printing quality is generally improved and costs are reduced
      by the removal of the image setter, processor, stripper, etc.
Furthermore,
      in the area of digital light projection (or display), we believe the sizeable
      home theater and rear projection markets will migrate toward laser light sources
      for longer life, more efficient use of electrical power and sharper
      images.
Commercial
      Laser Markets
We
      estimate that the global laser market is greater than $5 billion in annual
      revenues. Lower margin, commodity diodes (optical storage and
      telecommunications) represent over 50% of the market, and we do not consider
      this sector economically attractive. The remaining, higher margin marketplace,
      which is where we are positioned, is comprised of non-diode lasers and high
      power diodes. In the future, we believe that emerging applications, including
      defense and display, will increase the overall size of the market. Market sizes
      in this section are primarily derived from
Laser
      Focus World
,
      January
      2005 and February 2005 issues, and secondarily from market participant
      inquiries.
7
Target
      Markets
QPC's
      higher-margin target markets include the $2 billion non-diode segment, the
      $220
      million high power diode segment, and the emerging markets (defense and display)
      that we anticipate will each grow in size to more than $1 billion over the
      next
      several years. Today, the $2 billion industrial high power laser market is
      segmented as follows: materials processing ($1 billion), medical ($400 million),
      semiconductor ($312 million), scientific/research ($150 million),
      instrumentation/biotech (greater than $80 million), and printing ($40
      million).
Even
      though diode lasers are more affordable, compact and efficient, they have
      experienced only a 10% penetration rate of the industrial market. This
      historically low adoption rate is related to the poor beam quality associated
      with diode lasers. We believe that, with our superior diode laser product,
      which
      has better beam quality than other commercially available diode and non-diode
      lasers, we will be able to gain market share vis-à-vis our
      competitors.
Materials
      processing (welding, cutting, drilling, heat treatment, marking) is a large,
      $1
      billion addressable market. Diodes have only reached a fraction of the market
      with $5 million in sales (for direct diode applications; and somewhat more
      through pumping, or indirect applications). In the $400 million medical area
      (ophthalmology, therapeutic, dermatology, dental), diode sales are approximately
      $60 million. One near-term opportunity for us is in the area of laser hair
      removal and skin treatment, particularly tattoo removal and acne treatment.
      Procter & Gamble, Gillette and Johnson & Johnson intend to make laser
      consumer products and QPC believes it is positioned, because of its capabilities
      at eye-safe wavelengths, to be a laser supplier to these consumer giants.
      Another immediate market opportunity is in the treatment of varicose veins
      where
      a major medical system manufacturer already considers QPC to be the preferred
      manufacturer for its laser diodes.
With
      respect to $312 million of semiconductor applications (lithography, via
      drilling, inspection/defect analysis and repair), diodes have experienced zero
      penetration. In science/research ($150 million) and instrumentation/biotech
      (approximately $75 million in sales for DNA sequencing, microscopy, flow
      cytometery), diode lasers have negligible market share.
Diode
      lasers have been more successful in penetrating the $40 million printing and
      reprographics field (computer-to-plate for magazines, newspapers,
      photofinishing) with approximately 50% market share. Companies using large
      volumes of diode lasers on a large-scale basis are Kodak (through its recent
      acquisition of CREO), Heidelberg, Agfa and Dainippon Screen. QPC's designs bring
      the cost of diodes down to one tenth of the prevailing industry cost. Finally,
      in the area of diode pumping of (solid state and fiber) lasers, which is a
      $115
      million market, diodes have 100% market share.
In
      the
      future, we intend to address what we consider to be attractive emerging markets,
      those of defense and display, both of which we estimate will become billion
      dollar niches. Defense applications include high-energy lasers for directed
      energy weapons, countermeasures for heat seeking missiles, target designation,
      remote sensing/LIDAR (light detection and ranging), ordinance initiation,
      illumination and display.
The
      Department of Homeland Security has earmarked $120 million for the testing
      of
      laser countermeasures and has been directed by Congress to move rapidly to
      adapt
      military technology to approximately 7,000 commercial jets in the U. S. alone.
      According to a recent study by Congress, more than 350,000 shoulder-fired
      missiles exist in government arsenals throughout the world. Unfortunately,
      not
      all of these missiles are properly accounted for and they are subject to black
      market trafficking. In the face of this potential threat, the Department of
      Homeland Security has mandated that commercial jets be equipped with laser
      systems to confuse heat-seeking missiles.
8
A
      Rand
      Corporation study estimates that using current technology—diode pumped YAG
      systems with frequency conversions—it would cost $1.6 million to equip each
      aircraft with these defensive capabilities. Besides the total cost of $11
      billion for such a project, YAG lasers are bulky, inefficient, expensive, and
      sensitive and require frequent, critical adjustments. Over time, Northrop
      Grumman estimates that it will be possible to bring the cost per aircraft down
      to the $1 million level. We believe that this cost could be reduced below $1
      million using QPC's mid-Infrared, or mid-IR, technology, which is small,
      compact, durable and easily manufactured. With the cost of the laser
      representing roughly one half of the entire system's price tag, this project
      area is a compelling target for us.
Another
      attractive market opportunity lies in the directed energy weapons ("DEWs")
      field, wherein laser weapons are expected to replace more traditional ordinance.
      We estimate that 2,000 to 10,000 DEWs will be deployed and that the cost (of
      the
      laser portion of each system) will be approximately $1 million. This translates
      into an addressable market with a potential of $2 billion to $10 billion and
      we
      have received DOD funding to develop this capability.
In
      2005,
      annual diode laser sales for defense purposes were only in the $15 million
      range, worldwide. Another promising field is display (laser television, laser
      theatre, boardroom projection, micro-display for laptops and telephones) and
      QPC
      intends to pursue its technology advantages to develop the potential of this
      sector. The home theater market is evolving toward laser light sources for
      longer life, more efficient use of electrical power and sharper images. The
      major participants in this area are Sony, Samsung and Texas Instruments,
      according to U. S. Display Consortium. While there is no current market for
      laser projection television sets because the technology has not been released,
      we believe that our technology will enable us to replace a significant portion
      of the multi-billion dollar rear projection television market will migrate
      toward laser light sources for longer life, more efficient use of electrical
      power and sharper images.
Competition
Other
      companies design and manufacture surface emitting lasers but they are lower
      powered, lower performance and generate lower yields. These manufacturers can
      produce individual laser diodes that work well but they cannot produce a chip
      with 10, 20 or 50 laser diodes, all of which are operating on high power and
      generating high yields. In addition, competitors offer traditional architecture
      for making surface emitting lasers at a fraction of a watt (milliwatts or
      microwatts) versus QPC's chips that produce hundreds of watts.
Management
      believes that our competitors who are working on improving diode technology
      are
      using traditional designs and trying to enhance laser performance with
      technology that is decades old. On the other hand, we have developed completely
      new technology platforms that produce much higher performance at lower costs.
QPC
      is
      beginning to compete against large companies such as
Coherent
      and Spectra Physics
and smaller entities such as
nLight
      Photonics and Alfalight
.
      However, we believe that while each competitor offers some commercially
      attractive features, there is no other company that offers the same range and
      completeness of features.
The
      following table highlights our standing with three categories of
      competitors:
High
                Brightness/ Diode Laser
Capability
High
                Power 2D arrays
Patents,
                Capability
Mid-IR
                laser diodes
Patents,
                Capability
Wafer
Fabrication
                Capability
Personnel
                experienced in high volume chip production
QPC
Yes
Yes
Yes
Yes
Yes
Larger
                competitors
No
No
No
Yes
Yes
Packager
                competitors
No
No
No
No
Yes
Epi-growth
                competitors
No
No
No
Yes
No
9
Several
      types of manufacturers participate today in the $200 million high power diode
      laser market.  Large manufacturers are typically vertically integrated with
      high volume semiconductor wafer fabrication capability, but these competitors
      do
      not have advanced technologies and patents for high brightness devices, high
      power, low cost surface emitting arrays, or mid-infrared devices.  Another
      type of competitor, which we call a "packaging competitor," focuses on high
      volume packaging only but lacks wafer fabrication capability or advanced
      technologies and patents.   Their inability to fabricate wafers combined
      with their lack of advanced technology makes it difficult for them to innovate
      new designs and products. A third type of competitor, which we call an
"Epi-growth (short for epitaxial) competitor", has low volume wafer fabrication
      capability left over from the telecom era, but lacks advanced technologies
      and
      patents.  In general, we believe that QPC is the only laser company with
      wafer fabrication capabilities, high volume experience, and advanced
      technologies and patents for high brightness devices, high power low cost
      surface emitting arrays, and mid-infrared devices.
Technology
      Platform
We
      have a
      variety of technologies that we believe are superior to conventional
      semiconductor-based lasers. To our knowledge, we have technology to produce
      the
      industry's most powerful and bright diode lasers for solid-state laser
"pumping", semiconductor laser arrays with the industry's highest spectral and
      spatial brightness, semiconductor lasers with the most robust and effective
      wavelength control, and the most promising technology for mid-infrared diode
      lasers for possible use in homeland security and defense.
We
      have
      manufactured arrays of laser diodes in which each diode has brightness exceeding
      conventional arrays by ten times (10x) or more. The high brightness of these
      arrays allows them to be used in applications such as direct diode materials
      processing, fiber-core laser pumping or red-green-blue displays that cannot
      use
      conventional laser diodes or arrays.
Our
      surface emitting array technology is a significant achievement in low cost
      laser
      manufacturing because for the first time
a
      complete two-dimensional high power array can be produced on a single wafer
      and packaged on a single cooler.
By
      contrast, conventional laser array technologies require individual manufacture,
      assembly and testing of each row of an array. Our surface emitting technology,
      which was developed with funding from the U.S. Navy represents a ten times
      (10x)
      decrease in the number of laser chips and coolers required. This technology
      also
      represents a breakthrough in reliability, because it eliminates the need for
      "micro-channel" coolers that are a leading cause of laser burnout.
We
      have
      developed high power lasers with
on-chip,
      monolithic wavelength control.
These
      lasers are used for pumping solid-state lasers as well as other applications,
      and have important advantages over conventional lasers including efficient
      absorption by the solid-state crystal, and three times (3x) lower temperature
      sensitivity of wavelength.
We
      have
      also developed high power long-wavelength arrays for pumping
eye-safe
lasers.
      These are lasers that emit beams that we estimate are nearly a million times
      less hazardous to the eye than conventional lasers, and are very important
      for
      industrial and military lasers in order to reduce the risk of collateral
      casualties. We have developed eye-safe laser arrays with industry leading
      performance, and are pursuing, a new class of advanced high performance
      wavelength stabilized arrays for eye-safe lasers. We believe that the U.S.
      Army,
      Navy and Air Force are actively pursuing the development of military lasers.
      As
      laser powers continue to increase, we believe the advantages offered by our
      surface-emitting and eye-safe technologies will become even more
      compelling.
Laser
      sources in the mid-infrared range may be of crucial importance for homeland
      defense against terrorism. They can be used to confuse heat-seeking missiles
      that might be used to attack airliners and also for early warning of biological
      and chemical attacks. At present, available sources of mid-infrared laser light
      are too expensive and delicate for commercial aviation. We have performed an
      early-stage demonstration of a novel technology for shifting the output of
      a
      laser diode into the mid-infrared wavelength range. This should enable us to
      provide compact, high performance mid-infrared laser diodes at very low cost
      of
      manufacture.
10
Sales
      and Marketing Plan
In
      the
      United States, we have a sales team that sells directly to our customers. In
      foreign markets, we use distributors to sell our products, and we have existing
      relationships in France, Italy, Germany, the United Kingdom, Israel, China
      and
      Japan. On a global basis, we employ various outside consultants to gain access
      to new accounts. Our in-house sales team currently consists of a Senior Vice
      President of Sales and Marketing, a Director of Worldwide Marketing, a North
      American Sales Manager, and a sales administrator.
Our
      marketing activities include advertising in several international trade journals
      and we have published articles in many magazines. Our scientists have presented
      several technical papers at military and general laser conferences. We also
      exhibit at more than five trade shows on an annual basis. In addition, we use
      an
      outside agency for graphic arts and marketing communications.
Our
      advertisements and website are currently producing an average of one new inquiry
      per day. We manage the inquiries by parceling them into 1) standard products;
      2)
      custom inquiries from desirable OEM target customers for products on our
      roadmap; and 3) other. Our general policy is to decline to quote on inquiries
      that do not fall within the first two categories.
Patents,
      Trademarks and Intellectual Property
We
      have
      been granted three patents and have 13 patents pending. These patents cover
      a
      suite of different technologies and are related to process (manufacturing),
      performance characteristics and design. We have applied for patents in our
      key
      markets of North America, Asia and Europe, and have been granted trade secret
      protection, where appropriate. We also believe that due to the complex nature
      of
      our products, they would be very difficult to reverse engineer and replicate
      with precision.
From
      time
      to time, we may encounter disputes over rights and obligations concerning
      intellectual property. Also, the efforts we have taken to protect our
      proprietary rights may not be sufficient or effective. Any significant
      impairment of our intellectual property rights could harm our business, our
      reputation, or our ability to compete. Also, protecting our intellectual
      property rights could be costly and time consuming.
We
      granted Finisar a non-exclusive license to all of our existing and future
      intellectual property rights. Finisar has no right to grant sub-licenses (except
      to end users) or assign its rights prior to September 2006. We may pay Finisar
      a
      forbearance fee of up to $1,500,000 (to be credited against the Termination
      Fee
      described hereinafter), to extend the restriction on sub-licensing or assignment
      by Finisar until September 2008. We may extinguish this license by paying
      Finisar a Termination Fee of $5,000,000 at any time prior to September 2006,
      $5,500,000 from September 2006 through September 2007 or $6,000,000 from
      September 2007 until September 2008. In addition, we granted Finisar most
      favored nation pricing assurances with respect to all Company
      products.
Research
      & Development
We
      currently conduct research and early stage development activities in-house.
      We
      retain title rights to all improvements or enhancements to our technology
      developed by or worked on by the outside laboratory. Mr. Ungar, our chief
      executive officer, is responsible for development of new product concepts.
      We
      have purchased materials and components for our products under development
      from
      a number of technology companies. We continue research on our Generation III
      technologies and other new concepts. We spent approximately $4.8 million for
      research and development in 2005 and $3.5 million in 2004.
11
Manufacturing
One
      of
      our core strategies is to tightly control our manufacturing process. We believe
      this is essential in order to maintain high quality products and enable rapid
      development and deployment of new products and technologies. We design and
      produce many of our own components and sub-assemblies in order to retain quality
      control. All of our manufacturing will be conducted at our Sylmar, California
      headquarters. We use contract manufacturing firms for certain specialized
      packaging functions.
Raw
      materials or sub-components required in the manufacturing process are generally
      available from several sources. However, any interruption or delay in the supply
      of any of these components or materials, or the inability to obtain these
      components and materials from alternate sources at acceptable prices and within
      a reasonable amount of time, would impair our ability to meet scheduled product
      deliveries to our customers and could cause customers to cancel
      orders.
We
      rely
      exclusively on our own production capability to manufacture certain strategic
      components, optics and optical systems, semiconductor lasers, lasers and
      laser-based systems. Because we manufacture, package and test these components,
      products and systems at our own facilities, and such items may not be readily
      available from other sources, any interruption in our manufacturing would
      adversely affect our business.
Customers
For
        the
        years ended December 31, 2005 and 2004 we had three and two major
        customers, respectively, whose revenue volume comprised approximately 61%
        and
        94%, respectively, of our total revenue. Total government contract revenue
        during the years ended December 31, 2005 and 2004 was approximately 45% and
        94%,
        respectively. As of December 31, 2005 the amounts due from government contracts
        was $15,669 and is included in accounts receivable in the accompanying financial
        statements.
Governmental
      Regulations
Our
      operations are subject to various federal, state and local environmental
      protection regulations governing the use, storage, handling and disposal of
      hazardous materials, chemicals, various radioactive materials and certain waste
      products. In the United States, we are subject to the federal regulation and
      control of the Environmental Protection Agency. We are further subject to
      regulation by the Los Angeles Fire Department and the South Coast Air Quality
      Management Department. Comparable authorities are involved in other countries
      and jurisdictions. We believe that compliance with federal, state and local
      environmental protection regulations will not have a material adverse effect
      on
      our capital expenditures, earnings and competitive and financial
      position.
Although
      we believe that our safety procedures for using, handling, storing and disposing
      of such materials comply with the standards required by federal and state laws
      and regulations, we cannot completely eliminate the risk of accidental
      contamination or injury from these materials. In the event of such an accident
      involving such materials, we could be liable for damages and such liability
      could exceed the amount of our liability insurance coverage and the resources
      of
      our business.
Legal
      Proceedings
We
      are
      not a party to any pending legal proceedings that, if decided adversely to
      us,
      would have a material adverse effect upon our business, results of operations
      or
      financial condition and are not aware of any threatened or contemplated
      proceeding by any governmental authority against our company. To our knowledge,
      we are not a party to any pending civil or criminal action or investigation.
Facilities
Our
      principal executive offices and manufacturing facilities are currently located
      at 15632 Roxford Street, Sylmar, California 91342 with a lease term of ten
      years
      and an option to extend at market rates for an additional five years of 40,320
      square feet, and expiration on May 31, 2016 for the initial term and May 31,
      2021 for the option. We use 18,000 square feet of our leased 40,320 square
      foot
      building and sub-let the remainder of our facility for warehousing space. We
      pay
      approximately $25,500 per month for lease payments and approximately $1,800
      per
      month for common area maintenance and recover $5,000 from our subleases, all
      on
      a month-to-month basis.
12
Employees
We
      have
      28 full-time and two part-time employees. In addition, we use two full-time
      contractors and two other contractors on an occasional basis. We have 14
      employees in R&D/Engineering, four in sales & marketing, and five in
      general & administration. No employee is represented by a labor union, and
      we have never suffered an interruption of business caused by labor disputes.
MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
Background
      & Financing History
We
      were
      incorporated in November 2000 by Jeffrey Ungar, Ph.D. and George Lintz, MBA
      (our
"Founders"). The Founders began as entrepreneurs in residence with DynaFund
      Ventures in Torrance, California and wrote the original business plan during
      their tenure at DynaFund Ventures from November 2000 to January 2001. The
      business plan drew on Dr. Ungar's 17 years of experience in designing and
      manufacturing semiconductor lasers and Mr. Lintz's 15 years of experience in
      finance and business; the primary objective was to build a state of the art
      wafer fabrication facility and hire a team of experts in the field of
      semiconductor laser design.
We
      secured our first round of equity financing in August 2001, led by Finisar
      Corporation (NASDAQ: FNSR), a telecommunications component manufacturer,
      headquartered in Sunnyvale, California. Finisar invested $5 million and DynaFund
      Ventures invested $2 million in our preferred stock. Other investors, including
      small funds and individuals, invested $2.03 million in the first round of
      financing.
In
      addition to Finisar's equity investment, they made a five-year term loan to us
      for $7 million, closing in two tranches between August 2001 and January 2002.
      The total investment of Finisar was $12 million including the preferred equity
      and debt. The total equity and debt capital invested in our company, as of
      January 2002, was $16 million.
With
      the
      proceeds of the initial financings, the Founders recruited three scientists
      who
      had previously worked for Dr. Ungar to form the core of our chip design team.
      We
      entered into a lease on an industrial building in Sylmar, California, and
      proceeded to customize the facility, outfitting it with a unique set of
      semiconductor growth and processing equipment.
The
      founders and initial investors believed that the potential laser diode
      technology that could be developed would be robust and our success would not
      be
      dependent on a single market. Our originally targeted market was fiber optic
      telecommunications. As it became clear within the first two years of operations
      that the telecommunication market was experiencing a slump, we investigated
      numerous markets that could benefit from our laser diode technology. The
      Founders and the Board of Directors selected high power laser manufacturing
      for
      applications in the materials processing industry because of its mature market
      size of over one billion dollars per year. Our market research determined that
      we would have compelling competitive advantages in the materials processing
      market and that the burgeoning defense/homeland security laser market had
      significant areas of technology overlap with the industrial materials processing
      market.
In
      the
      first calendar quarter of 2003, we decided on a course to: (a) pursue the
      materials processing and defense/homeland securities market as long term target
      markets (with development of our Generation III products); (b) initiate a market
      presence by offering Generation I products which are in "form, fit and function"
the same as other available products, but with higher reliability; (c) develop
      Generation II products which are form and fit the same as other available
      products, but with
much
      higher functionality
;
      and (d)
      use U.S. Government development funds to subsidize the development of our
      commercial products. We released our Generation I products in the second quarter
      of 2004 and are releasing our Generation II products in the fourth quarter
      of
      2005. Generation III products are expected to be released in the fourth quarter
      of 2006. Generation I products have been sold to customers in the medical,
      printing and solid state pumping industries.
13
We
      have
      used government development funds to subsidize product development. We were
      awarded four Phase I "Small Business Innovation Research" contracts and three of
      them have progressed to Phase II contracts.. Recently, we were selected as
      a
      sub-contractor as part of a team working on a project for the Defense Advance
      Research Project Agency ("DARPA"). Our portion of the DARPA contract is $3.1
      million to be carried out in two phases over three years. This contract will
      fund development of the early stages of semiconductor lasers to be used for
      Directed Energy Weapons; and the project overlaps with our development of lasers
      for the industrial materials processing market. In addition to U.S. Government
      funds, we have received development funds from U.S. prime defense contractors
      as
      well as a major foreign military contractor. The funds that we have received
      and
      expect to receive are for development that overlaps almost entirely with our
      commercial development.
In
      the
      third quarter of 2003, we raised a second round of equity financing. Finisar
      converted the $5 million remaining principal balance on their term loan into
      our
      Series B Preferred Stock and we raised an additional $2.8 million in new cash.
      Three of the five members of the Board of Directors at that time, founders
      Dr.
      Ungar and Mr. Lintz and independent director, Dr. Israel Ury, each purchased
      preferred stock in the Series B round of financing.
In
      the
      second quarter of 2004, we entered into a senior secured two-year note
      transaction with various investors and raised $3.25 million. In the second
      quarter of 2005, approximately $2.1 million of the $2.4 million outstanding
      balance was extended for an additional year. The largest participant in the
      note
      transaction, investing $2.5 million, was Envision Partners of which QPC's Chief
      Financial Officer, Mr. Lintz, is a 50% partner.
From
      the
      fourth quarter of 2004 through the first quarter of 2005, we raised $5.9 million
      in a third round of equity financing. Investors who participated in this round
      were approximately sixty high net worth individuals.
In
      third
      quarter 2005, we raised $215,500 through a sale of our common stock to eight
      high net worth individuals.
In
      November 2005, we raised $500,000 pursuant to a 10% secured note financing
      with
      Jeffrey Ungar, our Chief Executive Officer, and George Lintz, our Chief
      Financial Officer. Pursuant to these bridge notes, we issued these lenders
      warrants to purchase 320,000 shares of common stock at $1.25 per share ("Bridge
      Warrants"). In connection with extensions of the maturity date of these bridge
      notes from January 2006 to April 2006, we granted 900,000 additional Bridge
      Warrants to these lenders. The bridge notes were paid in full as of April 25,
      2006.
In
      January 2006, through a private placement offering, we raised $2,877,750 from
      the sale of
570,550
      units of our securities, each unit consisting of four shares of common stock
      and
      one warrant to purchase one share of common stock at $1.50 per share (for a
      total of 2,302,200 shares of common stock and 570,550 warrants).
Since
      February 2006, we closed on an additional 3,370,000 shares of common stock
      at a
      $1.25 per share for $4,212,500.
CRITICAL
        ACCOUNTING POLICIES AND ESTIMATES
Our
        discussion and analysis of our financial condition and results of operations
        are
        based on our consolidated financial statements, which have been prepared
        in
        accordance with accounting principles generally accepted in the U.S. The
        preparation of these financial statements requires us to make estimates and
        judgments that affect the reported amounts of assets, liabilities, revenues
        and
        expenses for each period. The following represents a summary of our critical
        accounting policies, defined as those policies that we believe are the most
        important to the portrayal of our financial condition and results of operations
        and that require management's most difficult, subjective or complex judgments,
        often as a result of the need to make estimates about the effects of matters
        that are inherently uncertain.
Impairment
        of Long-Lived Assets
On
        January 1, 2002, the Company adopted the provisions of SFAS No. 144,
"Accounting
        for the Impairment or Disposal of Long-Lived Assets."
SFAS No.
        144 addresses financial accounting and reporting for the disposal of long-lived
        assets and supersedes SFAS No. 121,
"Accounting
        for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
        of.
"
The
        adoption of this statement did not have a material effect on the Company's
        results of operations or financial condition.
Revenue
        Recognition
The
        majority of the Company's revenues result from fixed-price contracts with U.S.
        government agencies. Revenues from fixed-price contracts are recognized under
        the percentage-of-completion method of accounting, generally based on costs
        incurred as a percentage of total estimated costs of individual contracts
        ("cost-to-cost method"). Revisions in contract revenue and cost estimates are
        reflected in the accounting period as they are identified. Provisions for
        the
        entire amount of estimated losses on uncompleted contracts are made in the
        period such losses are identified. No contracts were determined to be in
        an
        overall loss position at December 31, 2005. At December 31, 2005, there was
        no
        deferred revenue and approximately $10,774 of unbilled receivable related
        to
        these government contracts.
The
        Company recognizes revenues on product sales, other than fixed-price contracts
        after shipment of the product to the customer and formal acceptance by the
        customer has been received. Depending upon the specific agreement with the
        customer, such acceptance normally occurs subsequent to one or more of the
        following events: receipt of the product by the customer, installation of
        the
        product by the customer.
Accounts
        receivable are reviewed for collectibility. When management determines a
        potential collection problem, a reserve will be established, based on
        management's estimate of the potential bad debt. When management abandons all
        collection efforts it will directly write off the account and adjust the
        reserve
        accordingly.
Management
        Estimates
The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States of America requires management to
        make
        estimates and assumptions that affect the reported amounts of assets 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.
Sales
      & Product Releases
QPC
      signed its first government development contract in the second quarter of 2002
      and we shipped our first commercial product in the second quarter of 2004.
      We
      hired our first salesman in the fourth quarter of 2003, added a Director of
      Worldwide Sales in the third quarter of 2004 and a Senior Vice President of
      Marketing & Sales in the second quarter of 2005. Our Marketing and Sales
      Department is headed by Dr. Paul Rudy; he was recruited from a Director of
      Marketing position at Coherent Inc., the world's largest publicly traded laser
      company. Dr. Rudy's Ph.D. in physics and his eight years of sales and marketing
      experience uniquely qualified him to become head of sales and marketing. QPC's
      Sales Department currently has three full time personnel and a network of
      worldwide representatives and distributors. We currently have 25 customers.
      We
      are still in the qualification stage of the sales cycle with most of these
      customers. However, several customers have made repeat orders and one customer
      ordered and received production quantity and made repeat orders. We expect
      many
      of the customers in the qualification phase to turn into production quantity
      customers in 2006. We have received "Non-recurring Engineering" funds, or "NRE"
from several customers to develop custom products for them using our proprietary
      technology. In addition to the customers from whom we have received purchase
      orders, we currently receive approximately one inquiry per day from new
      potential customers, and we have more than $20 million per annum of
      opportunities in-house for which we are at various stages of presentation and
      proposal.
14
Total
      sales grew from $89,161 in 2002; to $229,079 in 2003; to $1,062,133 in 2004
      to
      $1,073,091 in 2005. There were no "commercial" sales in 2002 and 2003, as all
      revenue was derived from government contracts. Commercial sales, which were
      initiated in 2004, contributed $75,002 to the total for the year. Calendar
      year
      2005 was a transitional year for QPC sales for two primary reasons: (1)
      commercial sales contributed 55% of the total sales for the year (up from less
      than 10% in 2004); and (2) while absolute sales were approximately the same
      in
      2005 as 2004, total backlog by January 2006 was approximately ten
      times greater than total backlog at the end of 2004.  Bookings shippable
      within 12 months at the end of 2004 were approximately $700,000
      and $1,062,000 at the end of 2005.
YEAR
        ENDED DECEMBER 31, 2005 COMPARED TO THE YEAR ENDED DECEMBER 31, 2004.
REVENUE.
        During the year ended December 31, 2005, QPC had revenue of $1,073,191 as
        compared to revenues of $1,050,816 during the year ended December 31, 2004,
        an
        increase of approximately 2%. This increase is attributable to growing our
        sales
        and marketing organization. We believe that our sales will continue to grow
        because we are strengthening our sales force and more new products will be
        launched. Additionally, we have existing contracts with scheduled shipments
        for
        2006 which will cause our revenue to grow in 2006 without any additional
        sales
        or product releases, assuming we produce and ship according to our commitments.
COST
        OF
        REVENUE. Cost of revenue, which consist of direct labor, overhead and material
        costs, were $1,009,477 for the year ended December 31, 2005 as compared to
        $786,605 for the year ended December 31, 2004. This increase is attributable
        to
        a new mix of products that initially have a higher cost of labor and materials.
        We expect the gross profit to increase on our existing products as we continue
        to produce and ship them.
GROSS
        PROFIT. Gross profit was $63,714 for the year ended December 31, 2005 as
        compared to $264,211 for the year ended December 31, 2004, representing gross
        margins of approximately 6% and 25%, respectively. The decrease in our
        gross profits is attributable to a new mix of producs that initially has
        a
        higher cost of labor and materials. QPC's management believes that in 2006,
        sales will increase while gross margin will increase as a result of increased
        efficiencies in our operations and higher volume production orders.
RESEARCH
        AND DEVELOPMENT COSTS. Research and development costs which consist of salaries,
        professional and technical support fees, material and overhead, totaled
        $4,753,356 for the year ended December 31, 2005, as compared to $3,451,538
        for
        the year ended December 31, 2004, an increase of approximately 38%.
GENERAL
        AND ADMINISTRATIVE EXPENSES. General and administrative expenses totaled
        $2,896,875 for the year ended December 31, 2005, as compared to $2,056,516
        for
        the year ended December 31, 2004, an increase of approximately 41%. This
        increase is primarily attributable to the expansion of our marketing, sales
        and
        operations; and the reallocation of personnel and resources from research
        and
        development to manufacturing. At this point, manufacturing overhead is grossly
        underutilized.
NET
        LOSS.
        QPC had a net loss of $7,777,858 for the year ended December 31, 2005 as
        compared to $5,339,419 for the year ended December 31, 2004. The increase
        in net
        loss is attributable to growing our sales and marketing department, increased
        research and development activities, and ramping up operations for higher
        volume production. QPC management believes that net loss will decrease as
        we
        introduce new products and increase sales.
Liquidity
      and Capital Resources
QPC
      lost
      $5.3 million in 2004 and lost $7.8 million in 2005. We currently have negative
      cash flow of approximately $600,000 per month. As QPC plans to increase its
      revenue in 2006 and 2007, we expect to decrease the negative cash flow and
      turn
      to cash flow positive. Current resources and sales projections require us to
      raise an estimated $5 million of additional
capital.
      We raised $2.9 million through an equity offering that ended in January 2006
      and
      $4.5 million so far in a second equity offering. Depending on how much money
      we
      raise in this second equity offering, market conditions, and cash needs, we
      may
      raise additional capital in the twelve months by means of a private placement
      or
      other financing vehicle.
In
      addition to raising capital through private placements, we are exploring the
      possibility of engaging a corporate investor whose business areas can
      potentially leverage QPC's technology and products. A strategic investor may be
      granted a favorable business arrangement, such as an exclusive license in a
      certain area of business as an inducement to make an investment in QPC. We
      believe that there are potential strategic investors who could leverage QPC's
      technology to increase their own sales and contracts to much larger volumes
      than
      QPC could attain directly in the near to intermediate term.
RECENT
        ACCOUNTING PRONOUNCEMENTS
In
        November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an amendment of
        ARB No. 43, Chapter 4". The amendments made by Statement 151 clarify that
        abnormal amounts of idle facility expense, freight, handling costs, and wasted
        materials (spoilage) should be recognized as current period charges and require
        the allocation of fixed production overheads to inventory based on the normal
        capacity of the production facilities. The guidance is effective for inventory
        costs incurred during fiscal years beginning after June 15, 2005. Earlier
        application is permitted for inventory costs incurred during fiscal years
        beginning after November 23, 2004. The Company has evaluated the impact of
        the
        adoption of SFAS 151, and does not believe the impact will be significant
        to the
        Company's overall results of operations or financial position.
In
        December 2004, the FASB issued SFAS No.153, "Exchanges of Nonmonetary Assets, an
        amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions." The
        amendments made by Statement 153 are based on the principle that exchanges
        of
        nonmonetary assets should be measured based on the fair value of the assets
        exchanged. Further, the amendments eliminate the narrow exception for
        nonmonetary exchanges of similar productive assets and replace it with a
        broader
        exception for exchanges of nonmonetary assets that do not have commercial
        substance. Previously, Opinion 29 required that the accounting for an exchange
        of a productive asset for a similar productive asset or an equivalent interest
        in the same or similar productive asset should be based on the recorded amount
        of the asset relinquished. Opinion 29 provided an exception to its basic
        measurement principle (fair value) for exchanges of similar productive assets.
        The Board believes that exception required that some nonmonetary exchanges,
        although commercially substantive, be recorded on a carryover basis. By focusing
        the exception on exchanges that lack commercial substance, the Board believes
        this Statement produces financial reporting that more faithfully represents
        the
        economics of the transactions. The Statement is effective for nonmonetary
        asset
        exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier
        application is permitted for nonmonetary asset exchanges occurring in fiscal
        periods beginning after the date of issuance. The provisions of this Statement
        shall be applied prospectively. The Company has evaluated the impact of the
        adoption of SFAS 152, and does not believe the impact will be significant
        to the
        Company's overall results of operations or financial position.
In
        December 2004, the FASB issued SFAS No.123 (revised 2004), "Share-Based Payment"
Statement 123(R) will provide investors and other users of financial statements
        with more complete and neutral financial information by requiring that the
        compensation cost relating to share-based payment transactions be recognized
        in
        financial statements. That cost will be measured based on the fair value
        of the
        equity or liability instruments issued. Statement 123(R) covers a wide range
        of
        share-based compensation arrangements including share options, restricted
        share
        plans, performance-based awards, share appreciation rights, and employee
        share
        purchase plans. Statement 123(R) replaces FASB Statement No. 123, Accounting
        for
        Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for
        Stock Issued to Employees. Statement 123, as originally issued in 1995,
        established as preferable a fair-value-based method of accounting for
        share-based payment transactions with employees.
However,
        that Statement permitted entities the option of continuing to apply the guidance
        in Opinion 25, as long as the footnotes to financial statements disclosed
        what
        net income would have been had the preferable fair-value-based method been
        used.
        Public entities (other than those filing as small business issuers) will
        be
        required to apply Statement 123(R) as of the first interim or annual reporting
        period that begins after June 15, 2005 and small business issuers will be
        required to adopt for reporting periods beginning after December 15, 2005.
        The
        Company has evaluated the impact of the adoption of SFAS 123(R), and believes
        the impact of amortization of issued unvested options will not be significant
        to
        the Company's overall results of operations or financial position.
In
        June 2005, the FASB issued SFAS 154, "Accounting Changes and Error
        Corrections," a replacement of existing accounting pronouncements. SFAS 154
        modifies accounting and reporting requirements when a company voluntarily
        chooses to change an accounting principle or correct an accounting error.
        SFAS
        154 requires retroactive restatement of prior period financial statements
        unless
        it is impractical. Previous accounting guidelines allowed recognition by
        cumulative effect in the period of the accounting change. SFAS 154 is effective
        for accounting changes and corrections of errors made in fiscal years beginning
        after December 15, 2005.
In
        February 2006, the FASB issued SFAS 155 Accounting for Certain Hybrid Financial
        Instruments, an amendment of SFAS 133 and 140. These SFAS's deal with derivative
        and hedging activities and accounting for transfers and servicing of financial
        instruments and extinguishment of liabilities. FAS 155 is effective for all
        financial instruments acquired or issued in an entity's first fiscal year
        beginning after September 15, 2006. The Company does not engage in the
        activities described in these SFAS's and does not have any intention of engaging
        in those activities when SFAS 155 becomes effective. The Company has evaluated
        the impact of the adoption of SFAS 155, and does not believe the impact will
        be
        significant to the Company's overall results of operations or financial
        position.
15
OFF-BALANCE
      SHEET ARRANGEMENTS
We
      have
      not entered into any financial guarantees or other commitments to guarantee
      the
      payment obligations of any third parties. We have not entered into any
      derivative contracts that are indexed to our shares and classified as
      shareholder's equity or that are not reflected in our consolidated financial
      statements. Furthermore, we do not have any retained or contingent interest
      in
      assets transferred to an unconsolidated entity that serves as credit, liquidity
      or market risk support to such entity. We do not have any variable interest
      in
      any unconsolidated entity that provides financing, liquidity, market risk or
      credit support to us or engages in leasing, hedging or research and development
      services with us.
INFLATION
We
      believe that inflation has not had a material effect on our operations to
      date.
RISK
      FACTORS
FACTORS
      THAT MAY AFFECT FUTURE PERFORMANCE
Before
      investing in our common stock you should carefully consider the following risk
      factors, the other information included herein and the information included
      in
      our other reports and filings.  Our business, financial condition, and the
      trading price of our common stock could be adversely affected by these and
      other
      risks.
RISKS
      OF
      THE BUSINESS
Because
      we are not profitable and expect to incur additional losses, we will require
      additional financing to sustain our operations and without it we may not be
      able
      to continue operations.
At
      December 31, 2005, we had cash on hand of $69,440 and, for the fiscal year
      ended
      December 31, 2005, incurred an operating loss of $7.8 million. As of December
      31, 2005, we had an accumulated deficit of approximately $32.8 million which
      includes losses incurred to date and preferred stock dividends in the form
      of
      common stock. We have never earned a profit and we anticipate that we will
      continue to incur losses for at least the next 18 months. We continue to operate
      on a negative cash flow basis. Our independent accountants have issued a going
      concern qualification in their report on our financial statements as of and
      for
      the period ending December 31, 2005. We believe that we will need to raise
      at
      least an additional $5 million in financing in order to have sufficient
      financial resources to fund our operations for the next 12 months because we
      are
      running a cash flow deficit. We may need additional funds to continue our
      operations, and such additional funds may not be available when required.
To
      date,
      we have financed our operations through the sale of stock and certain
      borrowings. We expect to continue to depend upon outside financing to sustain
      our operations for at least the next 12 months. Our ability to arrange financing
      from third parties will depend upon our perceived performance and market
      conditions. Our inability to raise additional working capital at all or to
      raise
      it in a timely manner would negatively impact our ability to fund our
      operations, to generate revenues, and to otherwise execute our business plan,
      leading to the reduction or suspension of our operations and ultimately forcing
      us to go out of business.
16
We
      have no committed sources of additional capital.
For the
      foreseeable future, we intend to fund our operations and capital expenditures
      from limited cash flow from operations, our cash on hand and the net proceeds
      from equity financings. If our capital resources are insufficient, we will
      have
      to raise additional funds. We may need additional funds to continue our
      operations, pursue business opportunities (such as expansion, acquisitions
      of
      complementary businesses or the development of new products or services), to
      react to unforeseen difficulties or to respond to competitive pressures. We
      cannot assure you that any financing arrangements will be available in amounts
      or on terms acceptable to us, if at all. If additional financing is not
      available when required or is not available on acceptable terms, we may be
      unable to fund our expansion, successfully promote our current products, license
      new products or enhance our products and services, take advantage of business
      opportunities, or respond to competitive pressures, any of which could have
      a
      material adverse effect on our business and the value of our common stock.
      If we
      choose to raise additional funds through the issuance of equity securities,
      this
      may cause significant dilution of our common stock, and holders of the
      additional equity securities may have rights senior to those of the holders
      of
      our common stock. If we obtain additional financing by issuing debt securities,
      the terms of these securities could restrict or prevent us from paying dividends
      and could limit our flexibility in making business decisions.
We
      are an early stage company with a limited operating history no significant
      revenues
.
We
      were
      formed in November 2000. Since that time, we have engaged in the formulation
      of
      a business strategy and the design and development of technologically advanced
      products. We have recorded limited revenues from various government-funded
      research programs, and we have generated only limited revenues from the sale
      of
      products. Our ability to implement a successful business plan remains unproven
      and no assurance can be given that we will ever generate sufficient revenues
      to
      sustain our business.
We
      do not have sufficient revenues to service our debt.
As
      of
      December 31, 2005, we had $3.0 million of debt secured by our fixed assets
      and
      intellectual property. The debt accrues interest at a rate of 10% per annum
      and
      requires monthly payments until June 25, 2007. Additional debt accrues interest
      at a rate of 10% per annum and requires monthly payments until September 30,
      2008, and may be extended at the option of the lenders under certain conditions.
      On November 25, 2005, we added $500,000 of bridge debt secured by our fixed
      assets and intellectual property. On January 25, 2006, we extended the maturity
      date of the bridge debt from January 31, 2006 to March 27, 2006 and granted
      300,000 additional warrants and paid the note holders an additional fee. We
      will
      be forced to grant additional warrants the longer this debt remains outstanding
      which will dilute your ownership.
The
      debt
      accrues interest at a rate of 10% per annum and is intended to be repaid from
      the proceeds of equity offering. We may not have enough capital to be able
      to
      fully cover debt service on these and other notes. We are relying on increased
      revenue and additional capital infusions to pay off this debt. We may not be
      able to increase our revenues or raise sufficient funds from third parties
      in
      order to carry out our business plan or repay the debt.
We
      have only limited proven commercial products
.
      We are
      currently engaged in the design and development of laser diode products for
      certain industrial and defense applications. Our most advanced technologies,
      including without limitation, our "Generation III" products, are in the design
      or prototype stage. These technologies may not be commercially viable for at
      least one year, more specifically, we expect to ship prototypes of our
      Generation III products in the fourth quarter of 2006, if they ever become
      viable at all. We have received only a limited number of purchase orders for
      our
      products and we only have a limited number of contractual arrangements to sell
      our products. The process of qualifying laser diodes for purchase by commercial
      or defense customers is lengthy and unpredictable. No assurance can be given
      that any of our products will achieve commercial success.
We
      are dependent on our customers and vulnerable to their sales and production
      cycles
.
      For the
      most part, we do not sell end-user products. We sell laser components that
      are
      incorporated by our customers into their products. Therefore, we are vulnerable
      to our customers' prosperity and sales growth. Failure of our customers to sell
      their products will ultimately hurt their demand for our products, and thus,
      have a material adverse effect on our revenues.
17
Unusually
      long sales cycles may cause us to incur significant expenses without offsetting
      revenue
.
      Customers often view the purchase of our products as a significant and strategic
      decision. Accordingly, customers typically expend significant effort in
      evaluating and testing our products before making a decision to purchase them,
      resulting in a long sales cycle, While our customers are evaluating our products
      and before they place an order, we may incur substantial expenses for sales
      and
      marketing and research and development to customize our products to the
      customer's needs. Even after evaluation, a potential customer may not purchase
      our products. As a result, these long sales cycles may cause us to incur
      significant expenses without ever receiving revenue to offset those
      expenses.
The
      markets for our products are subject to continuing change that may impair our
      ability to successfully sell our products
.
      The
      markets for laser diode products are volatile and subject to continuing change.
      For example, since 2001, the market for telecommunications and data
      communications products has been severely depressed while a more robust market
      for defense and homeland security applications has developed during the past
      year and a half. We must continuously adjust our marketing strategy to address
      the changing state of the markets for laser diode products, we may not be able
      to anticipate changes in the market and, as a result, our product strategies
      may
      be unsuccessful.
Our
      products may become obsolete if we are unable to stay abreast of technological
      developments
.
      The
      photonics industry is characterized by rapid and continuous technological
      development if we are unable to stay abreast of such developments, our products
      may become obsolete. We lack the substantial research and development resources
      of some of our competitors. This may limit our ability to remain technologically
      competitive.
We
      are dependent for our success on a few key executive officers. Our inability
      to
      retain those officers would impede our business plan and growth strategies,
      which would have a negative impact on our business and the value of your
      investment.
Our
      success depends on the skills, experience and performance of key members of
      our
      management team. We are heavily dependent on the continued services of Jeffrey
      Ungar, our Chief Executive Officer, George Lintz, our Chief Financial Officer
      and Chief Operating Officer, Thomas Stakelon, our Vice President, Engineering,
      and Paul Rudy, our Senior Vice President of Marketing and Sales. We do not
      have
      long-term employment agreements with any of the members of our senior management
      team. Each of those individuals without long-term employment agreements may
      voluntarily terminate his employment with the Company at any time upon short
      notice. Were we to lose one or more of these key executive officers, we would
      be
      forced to expend significant time and money in the pursuit of a replacement,
      which would result in both a delay in the implementation of our business plan
      and the diversion of limited working capital. We can give you no assurance
      that
      we can find satisfactory replacements for these key executive officers at all,
      or on terms that are not unduly expensive or burdensome to our company. We
      maintain $3.0 million and $2.0 million key man insurance policies on Mr. Ungar
      and Mr. Lintz, respectively. Although we intend to issue stock options or other
      equity-based compensation to attract and retain employees, such incentives
      may
      not be sufficient to attract and retain key personnel.
We
      are also dependent for our success on our ability to attract and retain
      technical personnel, sales and marketing personnel and other skilled management.
Our
      success depends to a significant degree upon our ability to attract, retain
      and
      motivate highly skilled and qualified personnel. Failure to attract and retain
      necessary
technical
      personnel, sales and marketing personnel and skilled management could
adversely
      affect our business. If we fail to attract, train and retain sufficient numbers
      of these highly qualified people, our prospects, business, financial condition
      and results of operations will be materially and adversely affected.
Our
      business is dependent upon proprietary intellectual property
      rights
.
      We have
      employed proprietary information to design our products. We seek to protect
      our
      intellectual property rights through a combination of patent filings, trademark
      registrations, confidentiality agreements and inventions agreements. However,
      no
      assurance can be given that such measures will be sufficient to protect our
      intellectual property rights. If we cannot protect our rights, we may lose
      our
      competitive advantage. Moreover, if it is determined that our products infringe
      on the intellectual property rights of third parties, we may be prevented from
      marketing our products.
18
The
      grant to Finisar of a nonexclusive license to our intellectual property rights
      may impair our ability to realize the full value of our intellectual property
      assets.
Pursuant
      to the terms of an Exchange Agreement with Finisar, we granted Finisar a royalty
      free, fully paid, nonexclusive license to all of our existing and future
      intellectual property (the "IP License"). Finisar has no right to grant
      sub-licenses (except to end users) or assign its rights prior to September
      2006.
      The Company may pay Finisar a forbearance fee of up to $1,500,000 (to be
      credited against the Termination Fee described hereinafter), to extend the
      restriction on sub-licensing or assignment by Finisar until September 2008.
      The
      Company may extinguish this license by paying Finisar a Termination Fee of
      $5,000,000 at any time prior to September 2006, $5,500,000 from September 2006
      through September 2007 or $6,000,000 from September 2007 until September 2008.
      In addition, the Company granted Finisar most favored nation pricing assurances
      with respect to all Company products. No assurance can be given that we will
      have adequate funds to repurchase the IP License prior to expiration of our
      repurchase rights. The existence of the IP License may impair our ability to
      realize the full value of our intellectual property assets. For example, we
      will
      not be able to enter into an exclusive license arrangement with any party as
      long as the IP License is outstanding. Finisar may potentially sell similar
      products at lower prices, thereby reducing our profit margin. Potential
      licensees may be expected to offer us less value for any nonexclusive rights
      as
      compared to the value we might realize if we were to grant exclusive rights.
      Moreover, the existence of the IP License may make it more difficult to enter
      into strategic business relationships with third parties.
We
      currently rely on R&D Contracts with the U.S.
      Government
.
      Currently, a significant part of our near term revenue is expected to be derived
      from research contracts from the U.S. Government. Changes in the priorities
      of
      the U.S. Government may affect the level of funding of programs. We may benefit
      if greater funds are allocated toward defense spending to the extent that our
      business is relevant to such defense programs. However, changes in priorities
      of
      government spending may diminish interest in sponsoring research programs in
      our
      area of expertise.
We
      may incur debt or issue preferred stock in the future
.
      In
      order to purchase equipment, terminate the Finisar License Agreement or fund
      operations, QPC may issue additional debt instruments or preferred stock which
      will have a senior claim on the assets of QPC in the event of a sale of assets.
      Debt service may cause strain on cash flow and impair business
      operations.
We
      face intense competition, including competition from companies with
      significantly greater resources than ours, and if we are unable to compete
      effectively with these companies, our market share may decline and our business
      could be harmed.
The
      laser
      industry is highly competitive with numerous competitors from well-established
      manufacturers to innovative start-ups. A number of our competitors have
      significantly greater financial, technological, engineering, manufacturing,
      marketing and distribution resources than we do. Their greater capabilities
      in
      these areas may enable them to compete more effectively on the basis of price
      and production and more quickly develop new products and technologies. In
      addition, new companies may enter the markets in which we compete, further
      increasing competition in the laser industry. For instance, larger companies
      such as Northrop Grumman and BAE Systems are currently developing laser
      technology to protect airliners from portable rocket launchers. We believe
      that
      our ability to compete successfully depends on a number of factors, including
      our innovative and advanced R & D department, strength of our intellectual
      property rights, and advanced manufacturing facility are the most important
      competitive factors and we plan to employ these elements as we develop our
      products and technologies, but there are many other factors beyond our control.
      We may not be able to compete successfully in the future, and increased
      competition may result in price reductions, reduced profit margins, loss of
      market share and an inability to generate cash flows that are sufficient to
      maintain or expand our development and marketing of new products, which would
      adversely impact the trading price of our common shares.
If
      our facilities were to experience catastrophic loss, our operations would be
      seriously harmed.
Our
      facilities could be subject to a catastrophic loss from fire, flood, earthquake
      or terrorist activity. All of our research and development activities,
      manufacturing, our corporate headquarters and other critical business operations
      are located near major earthquake faults in Sylmar, California, an area with
      a
      history of seismic events. Any such loss at this facility could disrupt our
      operations, delay production, and revenue and result in large expenses to repair
      or replace the facility. While we have obtained insurance to cover most
      potential losses, we cannot assure you that our existing insurance coverage
      will
      be adequate against all other possible losses.
19
The
      relative lack of public company experience of our management team may put us
      at
      a competitive disadvantage.
Our
      management team lacks public company experience, which could impair our ability
      to comply with legal and regulatory requirements such as those imposed by
      Sarbanes-Oxley Act of 2002. The individuals who now constitute our senior
      management have never had responsibility for managing a publicly traded company.
      Such responsibilities include complying with Federal securities laws and making
      required disclosures on a timely basis. Our senior management may not be able
      to
      implement and affect programs and policies in an effective and timely manner
      that adequately respond to such increased legal, regulatory compliance and
      reporting requirements. Our failure to do so could lead to the imposition of
      fines and penalties and further result in the deterioration of our
      business.
New
      rules, including those contained in and issued under the Sarbanes-Oxley Act
      of
      2002, may make it difficult for us to retain or attract qualified officers
      and
      directors, which could adversely affect the management of our business and
      our
      ability to obtain or retain listing of our common stock.
We
      may be
      unable to attract and retain qualified officers, directors and members of board
      committees required to provide for our effective management as a result of
      the
      recent and currently proposed changes in the rules and regulations which govern
      publicly-held companies, including, but not limited to, certifications from
      executive officers and requirements for financial experts on the board of
      directors. The perceived increased personal risk associated with these recent
      changes may deter qualified individuals from accepting these roles. The
      enactment of the Sarbanes-Oxley Act of 2002 has resulted in the issuance of
      a
      series of new rules and regulations and the strengthening of existing rules
      and
      regulations by the SEC. Further, certain of these recent and proposed changes
      heighten the requirements for board or committee membership, particularly with
      respect to an individual's independence from the corporation and level of
      experience in finance and accounting matters. We may have difficulty attracting
      and retaining directors with the requisite qualifications. If we are unable
      to
      attract and retain qualified officers and directors, the management of our
      business could be adversely affected.
Our
      internal controls over financial reporting may not be effective, and our
      independent auditors may not be able to certify as to their effectiveness,
      which
      could have a significant and adverse effect on our business.
We
      are
      subject to various regulatory requirements, including the Sarbanes-Oxley Act
      of
      2002. We, like all other public companies, must incur additional expenses and,
      to a lesser extent, diversion of our management's time in our efforts to comply
      with Section 404 of the Sarbanes-Oxley Act of 2002 regarding internal
      controls over financial reporting. We have not evaluated our internal controls
      over financial reporting in order to allow management to report on, and our
      independent auditors to attest to, our internal controls over financial
      reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002 and
      the rules and regulations of the SEC, which we collectively refer to as
      Section 404. We have never performed the system and process evaluation and
      testing required in an effort to comply with the management assessment and
      auditor certification requirements of Section 404, which will initially
      apply to us as of December 31, 2006. Our lack of familiarity with Section
      404 may unduly divert management's time and resources in executing the business
      plan. If, in the future, management identifies one or more material weaknesses,
      or our external auditors are unable to attest that our management's report is
      fairly stated or to express an opinion on the effectiveness of our internal
      controls, this could result in a loss of investor confidence in our financial
      reports, have an adverse effect on our stock price and/or subject us to
      sanctions or investigation by regulatory authorities.
If
      we are unable to obtain adequate insurance, our financial condition could be
      adversely affected in the event of uninsured or inadequately insured loss or
      damage. Our ability to effectively recruit and retain qualified officers and
      directors could also be adversely affected if we experience difficulty in
      obtaining adequate directors' and officers' liability insurance.
Although
      we currently have property insurance, liability insurance, and employment
      practices liability insurance, we may not be able to obtain all insurance
      policies that would adequately insure our business and property against damage,
      loss or claims by third parties. To the extent our business or property suffers
      any damages, losses or claims by third parties, which are not covered or
      adequately covered by insurance, our financial condition may be materially
      adversely affected. We may be unable to maintain sufficient insurance as a
      public company to cover liability claims made against our officers and
      directors. If we are unable to adequately insure our officers and directors,
      we
      may not be able to retain or recruit qualified officers and directors to manage
      the Company.
20
Economic,
      political, military or other events in the United States could interfere with
      our success or operations and harm our business.
We
      market
      and sell our products and services in the United States and abroad. The
      September 11, 2001 terrorist attacks disrupted commerce throughout the
      United States and other parts of the world. The continued threat of similar
      attacks throughout the world and the military action, or possible military
      action, taken by the United States and other nations, in Iraq or other countries
      may cause significant disruption to commerce throughout the world. To the extent
      that such disruptions further slow the global economy or, more particularly,
      result in delays or cancellations of purchase orders for our products or extends
      the sales cycles with potential customers, our business and results of
      operations could be materially adversely affected. We are unable to predict
      whether the threat of new attacks or the responses thereto will result in any
      long-term commercial disruptions or if such activities or responses will have
      a
      long-term material adverse effect on our business, results of operations or
      financial condition.
MARKET
      RISKS.
Our
      common stock may be thinly traded, so you may be unable to sell at or near
      ask
      prices or at all if you need to sell your shares to raise money or otherwise
      desire to liquidate your shares.
Prior
      to
      the Share Exchange, QLI's common shares have had no trading volume on the OTC
      Bulletin Board. Through this Share Exchange, QPC has essentially become public
      without the typical initial public offering procedures which usually include
      a
      large selling group of broker-dealers who may provide market support after
      going
      public. Thus, we will be required to undertake efforts to develop market
      recognition for us and support for our shares of common stock in the public
      market. The price and volume for our common stock that will develop after the
      Share Exchange cannot be assured. The number of persons interested in purchasing
      our common stock at or near ask prices at any given time may be relatively
      small
      or non-existent. This situation may be attributable to a number of factors,
      including the fact that we are a small company which is relatively unknown
      to
      stock analysts, stock brokers, institutional investors and others in the
      investment community that generate or influence sales volume, and that even
      if
      we came to the attention of such persons, they tend to be risk-averse and would
      be reluctant to follow an unproven company such as ours or purchase or recommend
      the purchase of our shares until such time as we became more seasoned and
      viable. As a consequence, there may be periods of several days, weeks, months,
      or more when trading activity in our shares is minimal or non-existent, as
      compared to a seasoned issuer which has a large and steady volume of trading
      activity that will generally support continuous sales without an adverse effect
      on share price. We cannot give you any assurance that a broader or more active
      public trading market for our common stock will develop or be sustained. While
      we are trading on the OTC Bulletin Board, the trading volume we will develop
      may
      be limited by the fact that many major institutional investment funds, including
      mutual funds, as well as individual investors follow a policy of not investing
      in Bulletin Board stocks and certain major brokerage firms restrict their
      brokers from recommending Bulletin Board stocks because they are considered
      speculative, volatile and thinly traded.
The
      application of the "penny stock" rules to our common stock could limit the
      trading and liquidity of the Common Stock, adversely affect the market price
      of
      our common stock and increase your transaction costs to sell those shares.
As
      long
      as the trading price of our common stock is below $5 per share, the open-market
      trading of our common stock will be subject to the "penny stock" rules, unless
      we otherwise qualify for an exemption from the "penny stock" definition. The
"penny stock" rules impose additional sales practice requirements on certain
      broker-dealers who sell securities to persons other than established customers
      and accredited investors (generally those with assets in excess of $1,000,000
      or
      annual income exceeding $200,000 or $300,000 together with their spouse). These
      regulations, if they apply, require the delivery, prior to any transaction
      involving a penny stock, of a disclosure schedule explaining the penny stock
      market and the associated risks. Under these regulations, certain brokers who
      recommend such securities to persons other than established customers or certain
      accredited investors must make a special written suitability determination
      regarding such a purchaser and receive such purchaser's written agreement to a
      transaction prior to sale. These regulations may have the effect of limiting
      the
      trading activity of our common stock, reducing the liquidity of an investment
      in
      our common stock and increasing the transaction costs for sales and purchases
      of
      our common stock as compared to other securities.
21
The
      market price for our common stock may be particularly volatile given our status
      as a relatively unknown company with a small and thinly traded public float,
      limited operating history and lack of profits which could lead to wide
      fluctuations in our share price.
The
      market for our common stock may be characterized by significant price volatility
      when compared to seasoned issuers, and we expect that our share price could
      continue to be more volatile than a seasoned issuer for the indefinite future.
      The potential volatility in our share price is attributable to a number of
      factors. First, as noted above, our shares of common stock may be sporadically
      and thinly traded. As a consequence of this lack of liquidity, the trading
      of
      relatively small quantities of shares by our stockholders may disproportionately
      influence the price of those shares in either direction. The price for our
      shares could, for example, decline precipitously in the event that a large
      number of our shares of common stock are sold on the market without commensurate
      demand, as compared to a seasoned issuer which could better absorb those sales
      without adverse impact on its share price. Second, we are a speculative or
      "risky" investment due to our limited operating history and lack of profits to
      date, and uncertainty of future market acceptance for our potential products.
      As
      a consequence of this enhanced risk, more risk averse investors may, under
      the
      fear of losing all or most of their investment in the event of negative news
      or
      lack of progress, be more inclined to sell their shares on the market more
      quickly and at greater discounts than would be the case with the stock of a
      seasoned issuer. Many of these factors will be beyond our control and may
      decrease the market price of our common shares, regardless of our operating
      performance. We cannot make any predictions or projections as to what the
      prevailing market price for our common stock will be at any time.
In
      addition, the market price of our common stock could be subject to wide
      fluctuations in response to:
·
quarterly
                variations in our revenues and operating expenses;
·
announcements
                of new products or services by us;
·
fluctuations
                in interest rates;
·
significant
                sales of our common stock, including "short"
                sales;
·
the
                operating and stock price performance of other companies that investors
                may deem comparable to us; and
·
news
                reports relating to trends in our markets or general economic
                conditions.
The
      stock
      market in general, and the market prices for penny stock companies in
      particular, have experienced volatility that often has been unrelated to the
      operating performance of such companies. These broad market and industry
      fluctuations may adversely affect the price of our stock, regardless of our
      operating performance.
Stockholders
      should be aware that, according to SEC Release No. 34-29093, the market for
      penny stocks has suffered in recent years from patterns of fraud and abuse.
      Such
      patterns include (1) control of the market for the security by one or a few
      broker-dealers that are often related to the promoter or issuer; (2)
      manipulation of prices through prearranged matching of purchases and sales
      and
      false and misleading press releases; (3) boiler room practices involving
      high-pressure sales tactics and unrealistic price projections by inexperienced
      sales persons; (4) excessive and undisclosed bid-ask differential and markups
      by
      selling broker-dealers; and (5) the wholesale dumping of the same securities
      by
      promoters and broker-dealers after prices have been manipulated to a desired
      level, along with the resulting inevitable collapse of those prices and with
      consequent investor losses. Our management is aware of the abuses that have
      occurred historically in the penny stock market. Although we do not expect
      to be
      in a position to dictate the behavior of the market or of broker-dealers who
      participate in the market, management will strive within the confines of
      practical limitations to prevent the described patterns from being established
      with respect to our securities. The occurrence of these patterns or practices
      could increase the volatility of our share price.
22
Limitations
      on director and officer liability and indemnification of our officers and
      directors by us may discourage stockholders from bringing suit against a
      director.
QLI's
      articles of incorporation and bylaws provide, with certain exceptions as
      permitted by governing state law, that a director or officer shall not be
      personally liable to us or our stockholders for breach of fiduciary duty as
      a
      director, except for acts or omissions which involve intentional misconduct,
      fraud or knowing violation of law, or unlawful payments of dividends. These
      provisions may discourage stockholders from bringing suit against a director
      for
      breach of fiduciary duty and may reduce the likelihood of derivative litigation
      brought by stockholders on our behalf against a director. In addition, QLI's
      articles of incorporation and bylaws may provide for mandatory indemnification
      of directors and officers to the fullest extent permitted by governing state
      law.
We
      do not expect to pay dividends for the foreseeable future, and we may never
      pay
      dividends
.
      We
      currently intend to retain any future earnings to support the development and
      expansion of our business and do not anticipate paying cash dividends in the
      foreseeable future. Our payment of any future dividends will be at the
      discretion of our board of directors after taking into account various factors,
      including but not limited to our financial condition, operating results, cash
      needs, growth plans and the terms of any credit agreements that we may be a
      party to at the time. In addition, our ability to pay dividends on our common
      stock may be limited by state law. Accordingly, investors must rely on sales
      of
      their Common Stock after price appreciation, which may never occur, as the
      only
      way to realize their investment.
Our
      operating results may fluctuate significantly, and these fluctuations may cause
      our common stock price to fall.
Our
      quarterly operating results may fluctuate significantly in the future due to
      a
      variety of factors that could affect our revenues or our expenses in any
      particular quarter. You should not rely on quarter-to-quarter comparisons of
      our
      results of operations as an indication of future performance. Factors that
      may
      affect our quarterly results include:
·
market
                acceptance of our products and technologies and those of our
                competitors;
·
speed
                of commercialization of our early stage, state-of-the-art designs
                and
                developments;
·
our
                ability to attract and retain key personnel;
                and
·
our
                ability to manage our anticipated growth and
                expansion.
Our
      executive officers, directors and insider stockholders own or control at least
      45% of our outstanding common stock, which may limit your ability and the
      ability of our other stockholders, whether acting alone or together, to propose
      or direct the management or overall direction of our Company. Additionally,
      this
      concentration of ownership could discourage or prevent a potential takeover
      of
      our Company that might otherwise result in you receiving a premium over the
      market price for your Shares.
We
      estimate that approximately 45% of our outstanding shares of common stock is
      owned and controlled by a group of insiders, including our directors and
      executive officers. Such concentrated control of the Company may adversely
      affect the price of our common stock. Our principal stockholders may be able
      to
      control matters requiring approval by our stockholders, including the election
      of directors, mergers or other business combinations. Such concentrated control
      may also make it difficult for our stockholders to receive a premium for their
      shares of our common stock in the event we merge with a third party or enter
      into different transactions which require stockholder approval. These provisions
      could also limit the price that investors might be willing to pay in the future
      for shares of our common stock. In addition, certain provisions of Nevada law
      could have the effect of making it more difficult or more expensive for a third
      party to acquire, or of discouraging a third party from attempting to acquire,
      control of us.
Accordingly, the existing principal stockholders together with
our
      directors and executive officers
will
      have the power to control the election of our directors and the approval of
      actions for which the approval of our stockholders is required. If you acquire
      Shares, you may have no effective voice in the management of the
      Company.
23
Future
      sales of our equity securities could put downward selling pressure on our
      securities, and adversely affect the stock price. There is a risk that this
      downward pressure may make it impossible for an investor to sell his securities
      at any reasonable price, if at all.
Future
      sales of substantial amounts of our equity securities in the public market,
      or
      the perception that such sales could occur, could put downward selling pressure
      on our securities, and adversely affect the market price of our common
      stock.
The
      foregoing risk factors are intended only as a summary of certain risk factors
      attendant to an investment in the Securities.
DESCRIPTION
      OF PROPERTY
The
      Company's headquarters is currently located at
15632
      Roxford Street, Sylmar, California 91342.
.
      We use
      18,000 square feet of our leased 40,320 square foot building which allows us
      to
      conduct nearly all of our operations on site, including R&D, semiconductor
      wafer fabrication, processing and packaging. We sublet the remainder of our
      facility for warehousing space.
24
SECURITY
      OWNERSHIP OF CERTAIN
BENEFICIAL
      OWNERS AND MANAGEMENT
SECURITY
      OWNERSHIP OF BENEFICIAL OWNERSHIP AND MANAGEMENT
PRIOR
      TO THE SHARE EXCHANGE
The
      following table sets forth, as of May 12, 2006, certain information regarding
      the ownership of the Company's capital stock by the following persons on such
      date: each of the directors and executive officers, each person who is known
      to
      be a beneficial owner of more than 5% of any class of our voting stock, and
      all
      of our officers and directors as a group. Unless otherwise indicated below,
      to
      our knowledge, all persons listed below had sole voting and investing power
      with
      respect to their shares of capital stock, except to the extent authority was
      shared by spouses under applicable community property laws.
Beneficial
      ownership is determined in accordance with the rules of the Securities and
      Exchange Commission and generally includes voting or investment power with
      respect to securities. Shares of our common stock subject to options, warrants
      or convertible securities exercisable or convertible within 60 days of May
      12,
      2006 were deemed outstanding for computing the percentage of the person or
      entity holding such options, warrants or convertible securities but are not
      deemed outstanding for computing the percentage of any other person, and was
      based on 52,300,000 shares of the Common Stock issued and outstanding on a
      fully
      diluted basis, as of May 12, 2006.
Title
                of
Class
Name
                and Address
Of
Beneficial
                Owners (1)
Amount
                and Nature
Of
                Beneficial Ownership
Percent
Of
Class
Common
                Stock
Julie
                Morin (2)
50,000,000
96%
All
                officers and directors as a group (1 person)
50,000,000
96%
____________
(1)
Unless
                otherwise noted, the address for each of the named beneficial owners
                and
                directors and officers is 703 E. 27
th
Street, Spokane, Washington 99203.
(2)
Julie
                Morin is the Chief Executive Officer and sole Director of QPC Lasers,
                Inc.
                This excludes the sale of 48,294,115 shares of Company common stock
                to
                Target and transfer of 1,334,385 shares of Company common
                stock concurrent with the Share
                Exchange.
SECURITY
      OWNERSHIP OF BENEFICIAL OWNERSHIP AND MANAGEMENT
AFTER
      THE SHARE EXCHANGE
The
      following table sets forth information as of May 12, 2006 with respect to the
      beneficial ownership of the outstanding shares of Company's capital stock
      immediately following the Share Exchange by (i) each person known by Registrant
      who will beneficially own five percent (5%) or more of the outstanding shares;
      (ii) the officers and directors who will take office as of the effective date
      of
      the Share Exchange; and (iii) all the aforementioned officers and directors
      as a
      group.
25
Title
                of
Class
Name
                and Address
Of
Beneficial
                Owners (1)
Amount
                and Nature
Of
                Beneficial Ownership
Percent
Of
Class
                (2)
Common
                Stock
Jeffrey
                Ungar (3)
4,640,060
14.6%
George
                Lintz (4)
2,858,184
8.8%
Israel
                Ury
71,030
*
Robert
                Adams (5)
107,059
*
Merrill
                McPeak (6)
58,333
*
Thomas
                Stakelon
233,000
*
Paul
                Rudy(7)
425,000
1.4%
Finisar
                Corporation
6,750,726
21.8%
All
                officers and directors as a group (7 persons) - Ownership of Common
                Stock
                (8)
8,359,333
24.5%
(1)
Unless
                otherwise noted, the address for each of the named beneficial owners
                is:
                15632 Roxford Street, Sylmar, California 91342. Unless otherwise
                indicated, beneficial ownership is determined in accordance with
                Rule
                13d-3 promulgated under the Exchange Act and generally includes voting
                and/or investment power with respect to securities. Shares of common
                stock
                subject to options or warrants that are currently exercisable or
                exercisable within sixty days of the date of this offering memorandum
                are
                deemed to be beneficially owned by the person holding such options
                or
                warrants for the purpose of computing the percentage of ownership
                set
                forth in the above table, unless otherwise indicated.
(2)
The
                calculations of percentage of beneficial ownership are based
                on 30,992,004 shares of common stock outstanding as of May 12, 2006.
(3)
Includes
                100,000 shares underlying options exercisable at $0.38 per share
                and
                828,000 shares underlying warrants exercisable at $1.25 per
                share.
(4)
Includes
                100,000 shares underlying options exercisable at $0.38 per share,
                892,000
                shares underlying warrants exercisable at $1.25 per share, and 700,000
                shares underlying warrants exercisable at $1.00 per share. Also includes
                1,046,184 common shares held by Lintz Family
                Trust.
(5)
Includes
                  33,333 shares underlying options to purchase common
                  stock.
(6)
Includes
                58,333 shares underlying options at $1.25 per
                share.
(7)
Includes
                200,000 shares underlying options exercisable at $0.38 per share.
                Also
                includes 225,000 shares underlying options at a price to be determined
                by
                the Board of Directors but likely to be $1.25 per
                share.
(8)
Includes
                  3,136,666 shares underlying options to purchase common
                  stock.
26
DIRECTORS
      AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
APPOINTMENT
      OF NEW OFFICERS AND DIRECTORS
In
      connection with the Exchange Transaction, effective May 12, 2006, Ms. Morin
      resigned as Chief Executive Officer and sole Director of the Company,
Effective May
      12, 2006, the Board of Directors, appointed Jeffrey Ungar as Chief Executive
      Officer and a Director, and George Lintz as Chief Financial Officer and a
      Director. The Board of Directors also appointed Merrill McPeak, Israel Ury
      and
      Robert Adams as new Directors on the Board.
The
      following tables summarizes the Company's current executive officers and
      directors and the proposed executive officers and directors of the Company:
Name
Age
Position
Jeffrey
                Ungar
47
Chief
                Executive Officer, Chairman of the Board, Co-Founder and
                Director
George
                Lintz
45
Chief
                Financial Officer, Chief Operating Officer, Co-Founder and
                Director
Israel
                Ury
49
Director
Robert
                Adams
73
Director
Merrill
                A. McPeak
70
Director
Thomas
                Stakelon
59
Vice
                President, Engineering
Paul
                Rudy
35
Senior
                Vice President of Marketing and Sales
Timothy
                Franey
63
Vice
                President, Manufacturing
Jeffrey
      Ungar, Ph.D., President, Chief Executive Officer, Co-Founder and
      Director
Dr.
      Ungar
      started QPC in 2000 after a 17 year career at Ortel Corporation, a pioneer
      in
      the development of analog fiber optic technology for CATV. He joined Ortel
      in
      1983 as one of the first five employees, and stayed at Ortel until after its
      sale to Lucent Technologies in 2000 for approximately $2.95 billion. At Ortel,
      he occupied senior positions including Director of Advanced R&D for
      Optoelectronic Devices and Director of Material and Structure Technologies.
      He
      holds a Ph.D. in Nuclear Physics from Caltech.
George
      M. Lintz, M.B.A., Chief Financial Officer, Chief Operating Officer, Co-Founder
      and Director
Mr.
      Lintz
      started QPC along with Dr. Ungar in 2000 after a fifteen year career in
      investment banking. Mr. Lintz founded Lintz Glover White & Company in 1987,
      an SEC registered, NASD member broker/dealer, and ran the Broker-Dealer until
      it
      was acquired in December 1999. During his tenure at Lintz Glover White, Mr.
      Lintz financed a number of early stage companies from the technology and finance
      industries. He founded and served as Chairman of G&H Financial, a commercial
      finance lender from 1989 to 1994, in which capacity he provided asset-based
      financing for manufacturing companies. In 1994, Mr. Lintz was appointed by
      the
      California State Senate to serve as an advisor to their Local Government
      Investment Committee. As an advisor, he assisted in drafting the legislation
      that governs investment practices of state and local government entities in
      California. Mr. Lintz has been associated with various financial services firms
      on a part-time basis until July 2005. Mr. Lintz received his M.B.A. in Finance
      from New York University in 1984.
27
Israel
      Ury, Director
Dr.
      Ury
      has served as QPC's Director since November 2001. From July 2001 to September
      2002, he also served as a director for Memlink, Inc. From February 2000 to
      July
      2001 he served as a Senior Technology Consultant for Lucent Technologies and
      Agere Systems. Dr. Ury founded and served as an executive officer of diode
      laser
      manufacturer, Ortel Corporation from 1980 to 2000. Dr. Ury received his B.S.
      and
      M.S. from the University of California at Los Angeles, and his Ph. D from
      California Institute of Technology.
Robert
      Adams, Director
Mr.
      Adams
      was appointed a director in May 2006.
Mr.
      Adams
      began his career as an engineer at Bendix Aviation designing control systems
      for
      aircraft jet engines. He then designed ordnance systems as a non-commissioned
      army officer. After military service, he worked as a design engineer at Inland
      Steel Co. where he became involved in the use of computers to control steel
      making processes. He continued this interest as a control system designer at
      TRW/Bunker Ramo where he received several patents for multivariable control
      systems in the production of steel products.
In
        1969,
        Mr. Adams joined Xerox Corporation. At the time Mr. Adams was Vice President
        of
        Marketing at SDS responsible for planning and marketing of new technologies.
        In
        1975 he advanced within Xerox and managed a new business using computers
        to
        convert high-speed copiers into laser printers. This business alone has grown
        to
        over $6 billion in annual revenue. Mr. Adams was promoted from the President
        of
        Printing Systems to Group Vice President of the Xerox Systems Group (XSG)
        where
        he led the introduction of a number of new office products, some  from
        Xerox PARC. At this time he sponsored a project to develop the first high-speed
        digital copier which under his guidance resulted in the development of
        high-quality, and high-speed digital scanners. Engineering of these products
        required the design of 13 application specific IC's (ASIC's) and other advance
        electronic design concepts. Mr. Adams was promoted to Executive Vice President
        in 1986 and moved to Xerox headquarters in Connecticut. In 1989 Mr. Adams
        began
        a venture capital activity on behalf of Xerox (Xerox Technology Ventures).
        XTV
        was completed in 1999. For the past five years, Mr. Adams has managed Adams
        Capital Management, a private investment company. Mr. Adams serves on the
        Board
        of Directors of Tekelec Corp. (NASDAQ-NMS: TKLC), a manufacturer of network
        switching products, and The Los Angeles Opera Company, a private corporation.
        Mr. Adams received a B.S. in Mechanical Engineering from Purdue University
        and
        an M.B.A. from the University of Chicago. He was awarded the Distinguished
        Engineering Alumnus in 1983 as well as the Outstanding Mechanical Engineer
        from
        Purdue. He was elected a Life Member of the President's Council of the
        University of Chicago Graduate School of Business.
Merrill
      ("Tony") McPeak, Director
Gen.
      Merrill A. McPeak has served as the Vice-Chairman of our Board of Directors
      since January 2006. Gen. McPeak is President of McPeak and Associates, a
      management-consulting firm he founded in 1995. Gen. McPeak was Chief of Staff
      of
      the Air Force during the early 1990s. He entered the U.S. Air Force in November
      1957 and was a fighter pilot during his early years. He flew 269 combat missions
      in Vietnam. In 1967-68, he performed in nearly 200 official air shows as Solo
      Pilot for the USAF Aerial Demonstration Team, the "Thunderbirds." He commanded
      NATO's 20th Fighter Wing in 1980-81, Twelfth Air Force in 1987-88, Pacific Air
      Forces from 1988 to 1990, and was Chief of Staff of the Air Force from November
      1990 to October 1994, when he retired from active military service. General
      McPeak is Chairman of the Board of Ethicspoint, Inc. and a director of several
      other private companies. He is a director of the following public companies:
      Del
      Global Technologies (OTC: DGTC), a manufacturer and marketer of medical imaging
      systems; Gigabeam Corporation (OTC BB: GGBM), a supplier of high performance,
      high availability fiber-speed wireless communications; Health Sciences Group,
      Inc., (OTC BB: HESG), a provider of preventive healthcare alternatives; MathStar
      (NASDAQ-NMS: MATH), a designer and marketer of specialized semiconductor
      integrated circuits; and Tektronix, Inc. (NYSE: TEK), a manufacturer and
      marketer of test and measurement solutions.
28
Thomas
      Stakelon, Ph.D., V.P. Engineering
Dr.
      Stakelon serves as the VP of Engineering at QPC where he is responsible for
      managing the engineering resources that are delivering the Company's new
      products. Before joining QPC, he was Director of Engineering at Spectra-Physics,
      Inc. where he led development and reliability qualification of high power laser
      diode products for pumping solid state lasers, materials processing,
      telecommunications and other markets. During a long career at Agere Systems
      and
      Lucent Technologies, he successfully introduced important new optical products
      for telecommunications. Most recently, as President of LD Fiberoptics, he
      launched a small subsidiary of Agere's for the automated manufacture of passive
      optical components. Prior to this, he led teams developing new products and
      manufacturing processes for Lucent's' optoelectronics division. These included
      optical amplifiers, passive components, pump laser modules and low cost laser
      modules for terrestrial and undersea applications. He worked with other major
      companies on several joint product developments. While at Lucent, he focused
      on
      device packaging, product reliability and the customer technical interface.
      These efforts resulted in numerous design wins with substantial new revenue.
      He
      is responsible for numerous patents, publications and short courses. He holds
      an
      M.S and a Ph.D. in Physics from the University of Illinois.
Paul
      Rudy, Ph.D., Senior Vice President of Marketing and Sales
Paul
      comes to QPC from an extensive career with Coherent, Inc. He served as Director
      of Marketing at Coherent Inc.'s Semiconductor Business Unit, leading the
      tactical and strategic marketing activities of the high power diode laser
      business, overseeing product management and developing strategies for the
      business unit's technology, products, and markets. From 2000 through 2003, Dr.
      Rudy acted as Coherent's Market Development Manager, responsible for developing
      and executing sales and tactical marketing strategies in the defense and
      graphics arts markets in North America. Prior to this, he acted as the Product
      Marketing Manager for Coherent Semiconductor Business Unit, focusing on
      unmounted bars and stacks. From 1997 to 1999, he was the Scientific Sales
      Engineer in the Mid-Atlantic region for Coherent Semiconductor Group and
      Coherent Laser Group. There, he developed several markets for Coherent Inc
      including the scientific market, enhanced imaging MRI, and defense applications.
      Prior to his position with Coherent Inc in the Mid-Atlantic, Dr. Rudy worked
      in
      the Advanced Technical Sales Group at Coherent, Inc. headquarters. He received
      his masters and doctoral degrees in physics studying laser manipulation of
      atoms
      at the University of Rochester and his B.S. and B.A. from Duke University in
      physics and philosophy.
Timothy
      Franey, V.P., Manufacturing
Mr.
      Franey was retained as the Vice President, Manufacturing in May 2006.
      Immediately prior to joining Target, Mr. Franey worked at JDS Uniphase from
      May
      2005 to March 2006, as a Senior Program Manager integrating the merger with
      Lightwave Electronics Corporation. Prior to that, Mr. Franey served as Vice
      President, Operations from May 1997 to May 2005 at Lightwave, an OEM
      Manufacturer of Diode Pumped Solid State Laser Products. Reporting to the Chief
      Executive Officer, Mr. Franey had global operational responsibilities for supply
      chain, IS/IT, quality, production, facilities and manufacturing engineering
      management. He holds two B.S. degrees in Electrical Engineering and Industrial
      Engineering from the University of Washington. He also holds an M.B.A. from
      Santa Clara University.
EXECUTIVE
      COMPENSATION
None
      of
      our executive officers received compensation in excess of $120,000 for the
      fiscal years ended December 31, 2005, 2004 or 2003, respectively. The following
      table summarizes all compensation received by our previous Chief Executive
      Officer, President and Chief Financial Officer in fiscal years 2005, 2004 and
      2003.
29
SUMMARY
      COMPENSATION TABLE
LONG
                TERM COMPENSATION
ANNUAL
                COMPENSATION
AWARDS
PAYOUTS
Name
                and Principal Position
Year
Salary
($)
Bonus
($)
Other
Annual
                Compensation
($)
Restricted
Stock
                Awards
($)
Securities
                Underlying Options/SARs
LTIP
                Payout
($)
All
                Other Compen-sation
($)
Julie
                Morin,
2005
$
(1)
Former
                CEO
2004
$
10,000
and
                CFO
2003
$
_______________
(1)
As
                of December 31, 2005, Ms. Morin was the President, Chief Executive
                Officer
                and sole director of the Company. Ms. Morin has not received any
                payment
                for her position.
STOCK
      OPTION GRANTS AND EXERCISES
For
      the
      fiscal year ended December 31 2005, and for each prior fiscal year, the Company
      did not issue any options or Stock Appreciation Rights to any officers,
      employees or directors.
EMPLOYMENT
      AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS FOR
      QPC
We
      currently have no employment agreements with any of our executive officers,
      nor
      any compensatory plans or arrangements resulting from the resignation,
      retirement or any other termination of any of our executive officers, from
      a
      change-in-control, or from a change in any executive officer's responsibilities
      following a change-in-control.
COMPENSATION
      OF DIRECTORS
During
      the most recent fiscal year, our sole director, Julie Morin did not receive
      any
      compensation.
30
CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant
      to a Loan Agreement, we issued a 10% secured promissory note in the principal
      amount of $200,000 to Jeffrey Ungar, our Chief Executive Officer, and another
      10% secured promissory note in the principal amount of $300,000 to George Lintz,
      our Chief Financial Officer on November 25, 2005 (collectively, as amended,
      the
"Bridge Notes" and Mr. Lintz and Mr. Ungar may be referred to as the "Bridge
      Noteholders"). The notes were due and payable on January 31, 2006. The lenders
      have a security interest in our cash, deposit accounts, fixed assets,
      intellectual properties, and certain insurance proceeds. This security interest
      is subordinated to our Senior Secured Promissory Notes originally issued on
      May
      21, 2004 and the Senior Subordinated Secured Promissory Notes dated as of
      September 30, 2005. We also paid a loan origination fee of 5% or, $10,000 and
      $15,000, to each of Mr. Ungar and Mr. Lintz, respectively. We also granted
      to
      each of Mr. Ungar and Mr. Lintz, a warrant to purchase 128,000 and 192,000
      shares of our common stock at $1.25 per share, respectively.
Effective
      as of January 25, 2006, we amended the Loan Agreement to mature on March 27,
      2006 instead of January 31, 2006. This maturity date is subject to the Company's
      option to further extend the maturity date by another 30 days ("Extension
      Option"). In consideration of this amendment, the Company paid the Bridge
      Noteholders a loan origination fee of 3% of the original principal amount of
      the
      Notes ("3% Origination Fee") or $15,000. The Company also issued warrants to
      purchase shares of Common Stock at $1.25 per share. The Company issued 60,000
      warrants for every $100,000 in principal loaned to the Company by the applicable
      Bridge Noteholder ("Bridge Warrants"). For every 30 day period beyond February
      24, 2006 that the Bridge Notes remain outstanding, the Company is obligated
      to
      issue another 60,000 Bridge Warrants for every $100,000 in principal
      outstanding. If the Company exercises the Extension Option, it shall pay the
      Bridge Noteholders an additional 3% Origination Fee and additional 60,000 Bridge
      Warrants for every $100,000 in principal outstanding.
During
      2004, we issued $3,250,000 of notes payable to seven note holders, some of
      whom
      are our stockholders. One note holder who purchased $2,500,000 in principal
      is a
      partnership of which Mr. Lintz is an owner. The original term of the notes
      are
      24 months, bearing interest at 10% per annum, with no principal and interest
      payments required for the initial three months. The notes are secured by all
      of
      the assets of the Company, including its intellectual property. One warrant
      for
      every $1.33 of principal was granted to each note holder, with each warrant
      being convertible into one share of common stock at $3.75 per share. The
      warrants are immediately vested and have a six year term. During 2005, five
      of
      the seven note holders agreed to modify the terms of their notes. The
      modifications include deferring principal payments from April 2005 to March
      2006, thereafter principal payments will commence until the notes are fully
      paid
      in May 2007. In addition, 840,000 warrants were issued to the five note holders
      who elected to defer principal payments on their loans.
DESCRIPTION
      OF SECURITIES
GENERAL
Our
      Company's Articles of Incorporation provide for authority to issue 180,000,000
      shares of Common Stock with a par value of $0.001 per Share. Immediately after
      the Closing, the capitalization of our Company consisted of 30,992,004
      shares of Common Stock.
COMMON
      STOCK
The
      holders of the Common Stock are entitled to receive dividends when and as
      declared by the Board of Directors, out of funds legally available therefore.
      The Company has not paid cash dividends in the past and does not expect to
      pay
      any within the foreseeable future since any earnings are expected to be
      reinvested in the Company. In the event of liquidation, dissolution or winding
      up of the Company, either voluntarily or involuntarily, each outstanding share
      of the Common Stock is entitled to share equally in the Company's assets. Each
      outstanding share of the Common Stock is entitled to equal voting rights,
      consisting of one vote per share.
31
MARKET
      PRICE OF AND DIVIDENDS ON COMMON EQUITY AND RELATED STOCKHOLDER
      MATTERS
Our
      common stock is not listed on any stock exchange. The common stock is traded
      over-the-counter on the Over-the-Counter Electronic Bulletin Board under the
      symbol "PLFC.OB". The following table sets forth the high and low bid
      information for the common stock for each quarter since the stock was first
      listed for trading in May 2005, as reported by the Over-the-Counter Electronic
      Bulletin Board. The bid prices reflect inter-dealer quotations, do not include
      retail markups, markdowns or commissions and do not necessarily reflect actual
      transactions.
LOW
HIGH
2006
First
                Quarter
*
*
2005
Fourth
                Quarter
*
*
Third
                Quarter
*
*
Second
                Quarter
*
*
As
      of
      April 30, 2006, there were approximately 24 stockholders of record of our common
      stock.
*
      There
      have been no trades of Company common stock during such quarter.
DIVIDENDS
We
      have
      never paid any dividends on the Common Stock or the Preferred Stock. We
      currently anticipate that any future earnings will be retained for the
      development of our business and do not anticipate paying any dividends on the
      Common Stock or the Preferred Stock in the foreseeable future.
TRANSFER
      AGENT
Our
      transfer agent is Holladay Stock Transfer and their address is 2939 North 67th
      Place, Scottsdale, Arizona, 85251. Their telephone number is
      480-481-3940.
EQUITY
      COMPENSATION PLAN INFORMATION
The
      2006
      Stock Incentive Plan became effective on May 3, 2006 in connection with this
      transaction. All options to purchase stock of QPC which were outstanding at
      the
      time were assumed by us and converted into options to purchase shares of our
      common stock. The number of shares subject to each assumed and converted option
      was equal to the number of shares of common stock which were subject to that
      option immediately prior to the conversion, and the exercise price per share
      remained the same as the per share exercise price in effect under the option
      at
      the time of conversion. Except for the conversion of the securities subject
      to
      the options into shares of our common stock, each option will continue to be
      governed by the terms of the agreement evidencing that option at the time of
      our
      conversion into a corporation.
The
      2006
      Stock Incentive Plan permits issuance of restricted stock or stock
      options.  At May 2006, only stock options are outstanding.  Under the
      2006 Stock Incentive Plan restricted stock or options may be granted to
      employees, non-employee members of our Board of Directors, and consultants
      and
      other independent advisors in our employ or service. The number of shares of
      common stock issuable under the 2006 Stock Incentive Plan is 5,400,000 shares.
32
Unvested options
      will vest on an accelerated basis in the event the Company is acquired and
      those
      options are not assumed or replaced by the acquiring entity. The options that
      were granted while we were a limited liability company, however, will terminate
      in the event the Company is acquired and those options are not assumed by the
      acquiring entity (unless their vesting is accelerated by our Compensation
      Committee). Each option will have a maximum term (not to exceed 10 years) set
      by
      the plan administrator (our Compensation Committee) at the time of grant,
      subject to earlier termination following the optionee's cessation of employment.
      All options are non-statutory options under the Federal tax law, unless they
      are
      incentive stock options granted to employees.
LEGAL
      PROCEEDINGS
From
      time
      to time, we may be involved in litigation or other business disputes including
      patent infringement, defamation and unfair competition. The Company's management
      is not aware of any material legal proceedings pending against the Company.
CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS
There
      have been no changes in or disagreements with the Company's independent
      auditors. The Company engaged its independent auditors, Bagell Josephs, Levine
      & Company, L.L.C. in December 2004.
RECENT
      SALES OF UNREGISTERED SECURITIES
Pursuant
      to the Share Exchange Agreement entered by and among shareholders of
      Quintessence Photonics Corporation, a Delaware corporation ("Target"),
      shareholders of the Target (the "Target Shareholders"), on the one hand, and
      Julie Morin (the "QLI Shareholder"), and the Company on the other hand, the
      Company issued shares of the Company's Common Stock (the "QLI Shares") to the
      Target Shareholders in exchange for 98% of the common stock of Target. The
      QLI
      Shares equaled 87% of the outstanding shares of the Registrant's common stock.
      The issuance of the QLI Shares to the Target Shareholders pursuant to the
      Exchange Agreement was exempt from registration under the Securities Act
      pursuant to Section 4(2) and/or Regulation D thereof. We made this determination
      based on the representations of the Target Shareholders which included, in
      pertinent part, that such shareholders were "accredited investors" within the
      meaning of Rule 501 of Regulation D promulgated under the Securities Act and
      that such shareholders were acquiring our common stock, for investment purposes
      for their own respective accounts and not as nominees or agents, and not with
      a
      view to the resale or distribution thereof, and that each person understood
      that
      the shares of our common stock may not be sold or otherwise disposed of without
      registration under the Securities Act or an applicable exemption therefrom.
INDEMNIFICATION
      OF DIRECTORS AND OFFICERS
No
      officer or Director of the Company shall be liable to the Company or its
      shareholders for the damages for the breach of a fiduciary duty as a Director
      or
      officer other than: (a) acts or omissions which involve intentional misconduct,
      fraud or a known violation of the law; or (b) the payment of dividends in
      violation of NRS 78.300.
33
The
      Company may purchase or maintain insurance or make other financial arrangements
      on behalf of any person who is or was a Director, officer, employee, or agent
      of
      the Company, or is or was serving at the request of the Company as a Director,
      officer, employee or agent of another corporation, partnership, joint venture,
      trust or other enterprise asserted against him in his capacity as Director,
      officer, employee or agent, or arising of his status as such, whether or not
      the
      Company has the authority to indemnify him against such liability or
      expense.
The
      Company shall indemnify all of its officers and Directors, past, present, and
      future against any and all expenses incurred by them, and each of them,
      including but not limited to, legal fees, judgments and penalties which may
      be
      incurred, rendered or levied in any legal action or administrative proceeding
      brought against them for any act or omission alleged to have been committed
      while acting within the scope of their duties as officers or Directors of the
      Company. The expenses of officers and Directors incurred and in advance of
      final
      disposition of the action or proceeding upon receipt of an undertaking by or
      on
      behalf of the officer or Director to repay the amount if it is ultimately
      determined by a court of competent jurisdiction that he/she is not entitled
      to
      be indemnified by the Company. Such right of indemnification shall not be
      exclusive of any other rights of indemnification, which the officers and
      Directors may have or hereafter acquire. Without limitation of the foregoing,
      the Board of Directors may adopt by-laws from time to time to provide the
      fullest indemnification permitted by the laws of the State of
      Nevada.
Item
      3.02
UNREGISTERED
      SALES OF EQUITY SECURITIES
Pursuant
      to the Share Exchange Agreement entered by and among shareholders of
      Quintessence Photonics Corporation, a Delaware corporation ("Target"),
      shareholders of the Target (the "Target Shareholders"), on the one hand, and
      Julie Morin (the "QLI Shareholder"), and the Company on the other hand, the
      Company issued shares of the Company's Common Stock (the "QLI Shares") to the
      Target Shareholders in exchange for at least 98% of the common stock of Target.
      The QLI Shares equaled 87% of the outstanding shares of the Registrant's common
      stock. The issuance of the QLI Shares to the Target Shareholders pursuant to
      the
      Exchange Agreement was exempt from registration under the Securities Act
      pursuant to Section 4(2) and/or Regulation D thereof. We made this determination
      based on the representations of the Target Shareholders which included, in
      pertinent part, that such shareholders were "accredited investors" within the
      meaning of Rule 501 of Regulation D promulgated under the Securities Act and
      that such shareholders were acquiring our common stock, for investment purposes
      for their own respective accounts and not as nominees or agents, and not with
      a
      view to the resale or distribution thereof, and that each person understood
      that
      the shares of our common stock may not be sold or otherwise disposed of without
      registration under the Securities Act or an applicable exemption therefrom.
Item
      5.01
CHANGES
      IN CONTROL OF REGISTRANT
Under
      the
      Exchange Agreement, on the Closing Date, the Registrant issued QLI Shares to
      the
      Target Shareholders in exchange at least 98% of the common stock of Target.
      On
      the Closing Date, the Registrant issued one QLI Share to the Target Shareholders
      in exchange for each Target Share. In addition, all options, warrants and
      convertible notes ("Derivative Security") that may be exercised or converted
      into Target Shares shall be exchanged for Derivative Securities that may be
      exercised or converted into QLI Shares. The number of QLI Shares underlying
      the
      new QLI Derivative Security will equal the number of QLI Shares that would
      have
      been issued to the Target security holder, had he exercised or converted the
      Target Derivative Security into Target Shares immediately prior to the Closing.
The
      sole
      director of the Registrant and holder of a majority of QLI Shares has approved
      the Exchange Agreement and the transactions contemplated thereunder. Target's
      directors and the Target Shareholders have approved the Exchange Agreement
      and
      the transactions contemplated thereunder (the "Exchange Transaction"). The
      holder of a majority of QLI Shares also sold 48,294,115 QLI Shares to the Target
      for $250,000. These shares have since been retired by Target.
As
      a
      result of this transaction, the Target Shareholders acquired control of the
      Company because the QLI Shares entitle the Target Shareholders to hold 87%
      or
      the majority number of voting shares of the Company. As a result of this change
      in change in control, Julie Morin agreed to resign as the Company's sole
      director, Chief Executive Officer and Chief Financial Officer. Further, prior
      to
      her resignation Morin , as the Company's sole member of the Board of Directors
      (the "Board"), agreed to appoint Jeffrey Ungar as the Company's new Chief
      Executive Officer, and George Lintz as the Company's new Chief Financial
      Officer. In addition, the Board also appointed Jeffrey Ungar, George Lintz,
      Merrill McPeak, Israel Ury and Robert Adams as Directors.
34
Item
                5.02
DEPARTURE
                OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT
                OF
                PRINCIPAL OFFICERS.
(a)
Resignation
      Of Director
Effective
      May 12, 2006, Julie Morin ("Morin") resigned as the sole member of the board of
      directors of the Registrant. There were no disagreements between Morin and
      any
      officer or director of the Registrant. The Registrant provided a copy of the
      disclosures it is making in response to this Item 5.02 to Morin and informed
      her
      that she may furnish the Registrant as promptly as possible with a letter
      stating whether she agrees or disagrees with the disclosures made in response
      to
      this Item 5.02, and that if she disagrees, then the Registrant requests that
      she
      provide the respects in which she does not agree with the disclosures. The
      Registrant will file any letter received by the Registrant from Morin as an
      exhibit to an amendment to this current report on Form 8-K within two business
      days after receipt by the Registrant.
(b)
Resignation
      Of Officers
Effective
      May 12, 2006, Morin resigned as the Chief Executive Officer and Chief Financial
      Officer of the Registrant
.
(c)
Appointment
      of Directors
Effective
      May 12, 2006, Jeffrey Ungar, George Lintz, Israel Ury, Merrill McPeak and Robert
      Adams were appointed as a members of the Registrant's Board of
      Directors.
Descriptions
      of the newly appointed directors and officers can be found in Item 2.01 above,
      in the section titled "DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
      PERSONS."
(d)
Appointment
      of Chief Executive Officer and Chief Financial Officer
Effective
      May 12, 2006, Mr. Jeffrey Ungar was appointed as Chief Executive Officer of
      the
      Registrant.
Effective
      May 12, 2006, Mr. George Lintz was appointed as the Chief Financial Officer
      of
      the Registrant.
Mr.
      Ungar
      and Mr. Lintz have no family relationships with any of the Company's other
      executive officers or directors. Related party transactions involving Mr. Ungar
      and Mr. Lintz are described in Item 2.01 above.
Item
      5.03
AMENDMENTS
      TO ARTICLES OF INCORPORATION OR BYLAWS
In
      connection with the Share Exchange Agreement the Company filed an amendment
      to
      its Articles of Incorporation increasing its authorized shares of common stock
      to 180,000,000 and changing the name of the Company from "Planning Force, Inc."
to "QPC Lasers, Inc." The Company also amended and restated its
      Bylaws.
35
Item
      5.06
CHANGE
      IN SHELL COMPANY STATUS
Under
      the
      Exchange Agreement, on the Closing Date, the Registrant issued QLI Shares to
      the
      Target Shareholders in exchange at least 98% of the common stock of Target.
      On
      the Closing Date, the Registrant issued one QLI Share to the Target Shareholders
      in exchange for each Target Share. In addition, all options, warrants and
      convertible notes ("Derivative Security") that may be exercised or converted
      into Target Shares shall be exchanged for Derivative Securities that may be
      exercised or converted into QLI Shares. The number of QLI Shares underlying
      the
      new QLI Derivative Security will equal the number of QLI Shares that would
      have
      been issued to the Target security holder, had he exercised or converted the
      Target Derivative Security into Target Shares immediately prior to the Closing.
      As a result of the Exchange, Target shareholders owned 87% of QLI after the
      Closing Date.
The
      closing of this transaction (the "Closing") occurred on May 12,
      2006.
Prior
      to
      the transaction, the Registrant was a company providing event and retreat
      planning services for corporate customers. Since inception in August 2004,
      this
      business has generated minimal revenue for the Registrant. From and after the
      Closing Date, the Registrant's primary operations will now consist of the
      operations of Target.
Item
      9.01    FINANCIAL STATEMENT AND EXHIBITS.
(a)
Financial
      Statements Of Businesses Acquired
The
      financial statements of Target for the the years ended December 31, 2005 and
      December 31, 2004 are incorporated herein by reference to Exhibit 99.2 to this
      Current Report.
(b)
Pro
      Forma Financial Statements
Our
      unaudited pro forma combined financial statements as of and for the year ended
      December 31, 2005 are incorporated herein by reference to Exhibit 99.3 to this
      Current Report.
Our
      unaudited pro forma combined balance sheet as of December 31, 2005 and our
      unaudited pro forma combined statement of operations for the year ended December
      31, 2005 are incorporated herein by reference to Exhibit 99.3 to this Current
      Report, and are based on the historical financial statements of us and Target
      after giving effect to the Exchange Transaction. In accordance with Statement
      of
      Financial Accounting Standards No. 141, "Business Combinations" (SFAS 141),
      and
      the assumptions and adjustments described in the accompanying notes to the
      unaudited pro forma combined condensed financial statements, Target is
      considered the accounting acquiror. The Exchange Transaction was completed
      on
      May 12, 2006. Because Target's owners as a group retained or received the larger
      portion of the voting rights in the combined entity and Target's senior
      management represents a majority of the senior management of the combined
      entity, Target was considered the acquiror for accounting purposes and will
      account for the Exchange Transaction as a reverse acquisition. The acquisition
      will be accounted for as the recapitalization of Target since, at the time
      of
      the acquisition, the development of our hardware product and the sales of our
      software product generated minimal revenues. Our fiscal year will end on
      December 31.
The
      unaudited pro forma combined balance sheet as of December 31, 2005 is presented
      to give effect to the Exchange Transaction as if it occurred on January 1,
      2005
      and combines the historical balance sheet of Target at December 31, 2005 and
      the
      historical balance sheet of QPC Lasers, Inc. at December 31, 2005. The unaudited
      pro forma combined statement of operations of Target and QPC Lasers, Inc. for
      the year ended December 31, 2005 is presented as if the combination had taken
      place on January 1, 2005.
36
Reclassifications
      have been made to QLI's historical financial statements to conform to Target's
      historical financial statement presentation.
The
      unaudited pro forma combined condensed financial statements should be read
      in
      conjunction with "Management's Discussion and Analysis of Financial Condition
      and Results of Operations" and the historical consolidated financial statements
      and accompanying notes of Target's and QPC Lasers, Inc. The unaudited pro forma
      combined condensed financial statements are not intended to represent or be
      indicative of our consolidated results of operations or financial condition
      that
      would have been reported had the Exchange Transaction been completed as of
      the
      dates presented, and should not be taken as representative of the future
      consolidated results of operations or financial condition of the Registrant.
(c)
INDEX
      TO EXHIBITS.
Exhibit
                Number
Description
2.1
Share
                Exchange Agreement by and among Quintessence Photonics Corporation
                ("Target"), QPC Lasers, Inc., the shareholders of Target, and Julie Morin
                dated May 12, 2006 (1)
3.1
Articles
                of Incorporation of QPC Lasers, Inc. as filed with the State of Nevada,
                as
                amended. (1) (2)
3.2
Amended
                and Restated Bylaws of QPC Lasers, Inc. (1)
99.1
Director's
                and Officer's Letter of Resignation by Ms. Julie Morin to the Board of
                Directors of QPC Lasers, Inc. (1)
99.2
Financial
                statements of Target for the years ended December 31, 2005 and December
                31, 2004.(1)
99.3
Unaudited
                pro forma condensed financial statements of QPC Lasers, Inc., as
                of and
                for the fiscal year ended December 31, 2005 and unaudited pro forma
                Statement of Operations for the fiscal year ended December 31, 2005.
                (1)
______________
(1)
Filed
                herewith.
(2)
Incorporated
                by reference from the Registrant's Registration Statement on Form SB-2, as
                amended.
37
SIGNATURES
Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Registrant
      has
      duly caused this Report to be signed on its behalf by the undersigned hereunto
      duly authorized.
Date:
                May 12, 2006
QPC
                Lasers, Inc.
By:
/s/
                George Lintz
George
                Lintz
Chief
                Financial Officer
38