UNITED ~~STATESSECURITIES~~STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

FORM 10-Q

|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Quarterly Period Ended March 31, 2006

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to .

~~For~~Commission File ~~the~~Number: ~~quarterly period ended March 31, 2005~~000-24999

OROPTA CORPORATION (Exact name of registrant as specified in its charter)

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Delaware	52-1947160
(State or other jurisdiction of incorporation or jurisdiction)	(I.R.S. Employer Identification Number)

~~For~~1350 Bayshore ~~the~~Highway, ~~transition~~Suite 600, ~~period~~Burlingame, ~~from~~CA ~~_______~~94010 (Address toof ~~_______~~principal executive offices, Zip code)

~~Commission~~650-579-3610 (Registrant’s ~~File~~telephone ~~No.~~number, ~~000-24999~~including area code)

~~OPTA~~Indicate ~~CORPORATION~~ by check mark whether the Registrant (~~Exact~~1) has filed all reports required to be filed by Section 13 ~~name~~or 15(d) of the Exchange Act during the preceding 12 months (or for such period that the registrant aswas ~~specified~~required into ~~its~~file ~~charter~~such reports) , and (2) has been subject to such filing requirements for the past 90 days. (1) Yes x No o (2) Yes x No o

Delaware	52-1947160
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

~~1350~~Large ~~Bayshore Highway,~~accelerated ~~Suite~~filer ~~740,~~o ~~Burlingame,~~Accelerated CAfiler ~~94010 (Address~~o ofNon-accelerated ~~principal~~filer ~~executive offices, zip code)~~ x

~~Registrant’s~~Indicate by check mark ~~telephone~~whether ~~number,~~the ~~including~~registrant ~~area~~is ~~code:~~a shell company (~~650)~~as ~~579~~defined in Rule 12b-~~3610~~2 of the Act). Yes o No x

~~Indicate by~~The ~~check~~number ~~mark~~of ~~whether~~shares ~~the~~of ~~Registrant~~Common ~~(1) has filed all reports required to be filed by~~Stock ~~Section~~outstanding 13as ~~or 15(d)~~ of ~~the~~June 19, ~~Exchange~~2006 ~~Act during the preceding 12 months (or for such period that the registrant~~ was ~~required to file such reports)~~50, ~~and (2) has been subject to such filing requirements for the past 90 days~~037,538. ~~(1) Yes |X| No |_| (2) Yes |X| No |_|~~

~~Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b~~FORM 10-~~2). Yes |_| No |X|~~ Q INDEX

The number of shares of Common Stock outstanding as of May 16, 2005 was 50,037,538.

PART I.		FINANCIAL INFORMATION
Item 1.		Financial Statements
		Condensed Consolidated Balance Sheets as of March 31, 2006 (unaudited) and June 30, 2005
		Condensed Consolidated Statements of Operations (unaudited) for the Three and Nine months ended March 31, 2006 and 2005
		Condensed Consolidated Statements of Cash Flows (unaudited) for the Nine months ended March 31, 2006 and 2005
		Notes to Condensed Consolidated Financial Statements (unaudited)
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.		Quantitative and Qualitative Disclosure About Market Risk
Item 4.		Controls and Procedures
PART II.		OTHER INFORMATION
Item 1.		Legal Proceedings
Item 1A.		Risk Factors
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.		Defaults Upon Senior Securities
Item 4.		Submission of Matters to a Vote of Security Holders
Item 5.		Other Information
Item 6.		Exhibits
SIGNATURE

~~FORM 10-Q INDEX~~2

		Page
PART I	FINANCIAL INFORMATION
Item 1	Financial Statements
	Condensed Consolidated Balance Sheets as of March 31, 2005
	(unaudited) and June 30, 2004	3
	Condensed Consolidated Statements of Operations (unaudited)
	for the Three and Nine Months Ended March 31, 2005 and 2004	4
	Condensed Consolidated Statements of Cash Flows (unaudited)
	for the Nine Months Ended March 31, 2005 and 2004	5
	Notes to Condensed Consolidated Financial Statements (unaudited)	6
Item 2	Management's Discussion and Analysis of Financial Condition
	and Results of Operations	13
Item 3	Quantitative and Qualitative Disclosure About Market Risk	25
Item 4	Controls and Procedures	25
PART II	OTHER INFORMATION
Item 1	Legal Proceedings	25
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3	Defaults Upon Senior Securities	26
Item 4	Submission of Matters to a Vote of Security Holders	26
Item 5	Other Information	26
Item 6	Exhibits	26
SIGNATURE		28

Forward-Looking Statements

This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 of Part I of this report, contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of Opta Corporation and its consolidated subsidiaries (“Opta” or “Company”) may differ materially from those expressed or implied by such forward-looking statements and assumptions. Any statements contained herein (including, without limitation, statements to the effect that the Company or management “estimates,” “expects,” “anticipates,” “plans,” “believes,” “projects,” “continues,” “may,” or “will” or statements concerning “potential” or “opportunity” or variations thereof or comparable terminology or the negative thereof), that are not statements of historical fact should be construed as forward looking statements. Additionally, all statements that address future operating performance, events or developments that our management expects or anticipates to incur in the future, are forward-looking statements. These forward-looking statements are based on our management’s current views and assumptions regarding future events and operating performance. Many factors could cause actual results to differ materially from estimates contained in our management’s forward-looking statements including the risk factors listed at pages 25-28. The differences may be caused by a variety of factors, including but not limited to assumptions relating to the execution and timing of restructuring our business, the inability to implement our new business model, adverse economic conditions, competitive pressures, inadequate capital, unexpected costs, lower revenues, increased net loss, the possibility of fluctuation and volatility of our operating results and financial condition and the loss of key executives, among other things. Because of these and other factors that may affect our operating results, past performance should not be considered an indicator of future performance and investors should not use historical results to anticipate results or trends in future periods. Opta assumes no obligation and does not intend to update these forward-looking statements.

~~PART I. FINANCIAL INFORMATION~~3

~~Item~~PART I. 1FINANCIAL ~~— Financial Statements:~~INFORMATION

~~OPTA~~Item ~~CORPORATIONCONDENSED~~1 ~~CONSOLIDATED~~- Financial ~~BALANCE SHEETS (in thousands)~~Statements:

	March 31, 2005 (Unaudited)			June 30, 2004
ASSETS
Current assets:
Cash and cash equivalents	$	1,947		$	3,037
Short-term investments		17,045			17,643
Accounts receivable, net		17,376			25,528
Inventories, net		18,458			18,004
Income tax receivable		909			909
Prepaid expenses and other current assets		2,086			2,270
Total current assets		57,821			67,391
Property and equipment, net		1,070			1,083
Tradename		2,420			2,420
Other assets		232			226
Total assets	$	61,543		$	71,120
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit	$	13,975		$	15,833
Notes and interest payable to related parties		10,873			10,795
Accounts payable and accrued expenses		22,150			14,262
Accounts payable to related parties		--			170
Accrued restructuring charges		--			796
Warranty reserve		490			490
Total current liabilities		47,488			42,346
Non-controlling interest in subsidiaries		6,438			8,425
Stockholders' equity:
Preferred stock, Series A $.001 par value, 100 authorized,		--			--
4 shares issued and outstanding at March 31, 2005
and June 30, 2004
Common stock $.001par value, 100,000 authorized,
64,241 shares issued and 50,037 outstanding at March 31, 2005
and 64,241 shares issued and 50,724 outstanding at June 30, 2004		64			64
Additional paid-in capital		128,442			128,431
Less: treasury stock at cost, 14,204 shares at March 31, 2005 and		(2,478	)		(2,410	)
13,517 at June 30, 2004
Accumulated deficit		(118,243	)		(105,611	)
Accumulated other comprehensive loss		(168	)		(125)
Total stockholders' equity		7,617			20,349
Total liabilities and stockholders' equity	$	61,543		$	71,120

OPTA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

	March 31, 2006			June 30, 2005
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	5,749		$	1,713
Accounts receivable, net	382			10,637
Inventories, net	200			10,234
Income tax receivable	—			1,574
Prepaid expenses and other current assets	132			480
Current assets of discontinued operations	—			18,058
Total current assets	6,463			42,696

Property and equipment, net	159			335
Tradenames	—			2,456
Total assets	$	6,622		$	45,487

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Line of credit	$	—		$	6,172
Notes and interest payable to related parties	996			12,294
Accounts payable and accrued expenses	10,334			18,656
Accounts payable to related parties	360			-
Accrued restructuring charges	24			-
Warranty reserve	490			490
Current liabilities of discontinued operations	—			10
Total current liabilities	12,204			37,622

Non-controlling interest in subsidiaries	—			6,435

Commitments and contingencies

Stockholders’ equity (deficit):
Preferred stock, Series A $.001 par value, 100 authorized, 4 shares issued and outstanding at March 31, 2006 and June 30, 2005	—			—
Common stock $.001par value, 100,000 authorized, 64,241 shares issued and 50,037 outstanding at March 31, 2006 and June 30, 2005	64			64
Additional paid-in capital	128,442			128,442
Less: treasury stock at cost, 14,204 shares at March 31, 2006 and June 30, 2005	(2,478		)	(2,478		)
Accumulated deficit	(131,610		)	(124,472		)
Accumulated other comprehensive loss	—			(126		)
Total stockholders’ equity (deficit)	(5,582		)	1,430
Total liabilities and stockholders’ equity (deficit)	$	6,622		$	45,487

-The 3accompanying notes -are an integral part of these unaudited condensed consolidated financial statements.

~~OPTA CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share amounts)~~4

	Three Months Ended March 31,						Nine Months Ended March 31,
	2005			2004			2005			2004
Net revenues:
Products	$	18,980		$	31,932		$	108,521		$	89,168
Products - related party		--			--			--			163
Total net revenues		18,980			31,932			108,521			89,331
Cost of net revenues:
Products		20,850			29,332			109,129			80,959
Products - related party		--			--			--			92
Total cost of net revenues		20,850			29,332			109,129			81,051
Gross profit (loss)		(1,870	)		2,600			(608	)		8,280
Operating expenses:
Selling, general and administrative		2,712			2,910			8,769			10,741
Research and development		621			394			1,923			2,435
Impairment of assets		--			--			--			36
Total operating expenses		3,333			3,304			10,692			13,212
Loss from operations		(5,203	)		(704	)		(11,300	)		(4,932	)
Other income (expense):
Interest income		105			112			316			450
Interest expense		(570	)		(216	)		(1,901	)		(676	)
Equity in loss of joint venture		--			2,380			--			1,733
Other		--			5			859			1,243
Total other income (expense), net		(465	)		2,281			(726	)		2,750
Income (loss) before income taxes and non-		(5,668	)		1,577			(12,026	)		(2,182	)
controlling interest
Provision (benefit) for income taxes		--			(9	)		--			1
Income (loss) before non-controlling interest		(5,668	)		1,586			(12,026	)		(2,183	)
Non-controlling interest in (income) loss
of consolidated subsidiaries		(9	)		(2,224	)		(606	)		(1,300	)
Net loss	$	(5,677	)	$	(638	)	$	(12,632	)	$	(3,483	)
Net loss per common share - basic and
diluted:	$	(0.11	)	$	(0.01	)	$	(0.25	)	$	(0.06	)
Weighted average common shares
outstanding - basic and diluted:		50,038			51,860			50,193			55,002

OPTA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

	Three Months Ended March 31,						Nine months ended March 31,
	2006			2005			2006			2005

Net revenues (returns)	$	(100	)	$	18,980		$	8,012		$	108,521

Cost of net revenues	34			20,850			11,388			109,129

Gross profit (loss)	(134		)	(1,870		)	(3,376		)	(608		)

Operating expenses:
Selling, general and administrative	2,011			2,641			8,402			10,278
Restructuring charges	106			—			1,119			—
Research and development	—			621			197			1,923
Total operating expenses	2,117			3,262			9,718			12,201

Loss from operations	(2,251		)	(5,132		)	(13,094		)	(12,809		)

Other income (expense):
Interest income	58			—			163			2
Interest expense	(16		)	(570		)	(260		)	(1,901		)
Gain on sale of intellectual property	—			—			6,505			—
Gain on sale of fixed assets	23			—			23			—
Other	—			—			(11		)	89
Total other income (expense), net	65			(570		)	6,420			(1,810		)
Loss from continuing operations before income taxes	(2,186		)	(5,702		)	(6,674		)	(14,619		)
Provision (benefit) for income taxes	—			—			—			—
Loss from continuing operations	(2,186		)	(5,702		)	(6,674		)	(14,619		)

Discontinued operations, net of tax:
Loss from liquidation of discontinued operations, net of taxes	—			—			(300		)	—
Income (loss) from discontinued operations, net of taxes	—			25			(164		)	1,987
Total gain (loss) from discontinued operations, net of taxes	—			25			(464		)	1,987

Net loss	$	(2,186	)	$	(5,677	)	$	(7,138	)	$	(12,632	)

Net loss per common share—basic and diluted:
Loss from continuing operations	$	(0.04	)	$	(0.11	)	$	(0.13	)	$	(0.29	)
Income (loss) from discontinued operations	—			—			(0.01		)	0.04
Net loss	$	(0.04	)	$	(0.11	)	$	(0.14	)	$	(0.25	)

Weighted average common shares outstanding—basic and Diluted	50,038			50,038			50,038			50,193

-The 4accompanying -notes are an integral part of these unaudited condensed consolidated financial statements.

~~OPTA CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands)~~5

	Nine Months Ended March 31,
	2005			2004
Operating activities
Net loss	$	(12,632	)	$	(3,483	)
Adjustments to reconcile net loss to net cash used in operating
activities:
Reserve for excess and obsolete inventory		3,346			1,885
Gain on treasury stock obtained during settlement		(842	)		(179	)
Gain on sale of joint venture		--			(1,053	)
Equity in loss of joint venture		--			647
Depreciation and amortization		378			352
Stock compensation expense (reversal) recorded by subsidiary		--			(104	)
Impairment of assets		--			36
Non-controlling interest in income (loss) subsidiary		606			(1,080	)
Non-cash recovery of bad debt		(1,946	)		--
Non-cash reversal of restructuring over accrual		(78	)		--
Changes in operating assets and liabilities:
Accounts receivable, net		8,152			(16,779	)
Accounts receivable from related parties, net		--			(63	)
Inventories, net		(3,800	)		(5,488	)
Prepaid expenses and other current assets		184			(1,197	)
Income tax receivable		--			2,218
Other assets		(6	)		(93	)
Accrued restructuring charges		(718	)		564
Accounts payable and accrued expenses		7,888			(677	)
Accounts payable to related parties		--			97
Interest payable to related parties		78			148
Warranty reserve		--			(198	)
Cash provided (used) by operating activities		610			(24,447	)
Investing activities
Purchases of property and equipment		(395	)		(442	)
Proceeds from sale of property and equipment		30			--
Payments received on notes receivable from related parties		--			1,592
Proceeds from sale of short-term investments		1,523			--
Proceeds from sale of joint venture		--			3,762
Purchase of short-term investments		(981	)		(2,283	)
Cash provided by investing activities		177			2,629
Financing activities
Proceeds from advances on line of credit		117,178			73,319
Payments on line of credit		(119,036	)		(59,634	)
Purchase of treasury stock		--			(2,006	)
Purchase of treasury stock by subsidiary		(19	)		--
Proceeds from issuance of stock by subsidiary		--			1
Proceeds from notes payable		--			4,500
Cash provided (used) by financing activities		(1,877	)		16,180
Net increase (decrease) in cash and cash equivalents		(1,090	)		(5,638	)
Cash and cash equivalents at beginning of period		3,037			12,044
Cash and cash equivalents at end of period	$	1,947		$	6,406

OPTA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

	Nine months ended March 31,
	2006			2005

Operating activities
Loss from continuing operations	$	(6,674	)	$	(14,619	)
Income (loss) from discontinued operations	(464		)	1,987
Adjustments to reconcile net loss to net cash provided (used) by operating activities:
Gain on treasury stock obtained during settlement	—			(89		)
(Income) loss from discontinued operations	464			(1,987		)
Depreciation and amortization	203			378
Gain on sale of intellectual property	(6,505		)	—
Gain on sale of fixed assets	(23		)	—
Changes in operating assets and liabilities:
Accounts receivable, net	10,255			8,252
Inventories, net	10,034			(454		)
Prepaid expenses and other current assets	348			63
Income tax receivable	1,574			—
Other assets	—			(6		)
Accrued restructuring charges	24			—
Accounts payable and accrued expenses	(8,322		)	7,984
Accounts payable to related parties	360			—
Interest payable to related parties	82			77
Cash provided by operating activities	1,356			1,586

Investing activities
Purchases of property and equipment	(27		)	(394		)
Purchases of tradename	(30		)	—
Proceeds from sale of property and equipment	23			30
Expenses associated with the sale of tradenames	(309		)	—
Proceeds from liquidated discontinued operations	5,467			—
Cash provided (used) by investing activities	5,124			(364		)

Financing activities
Proceeds from advances on line of credit	11,670			117,178
Payments on line of credit	(15,711		)	(119,036		)
Purchase of subsidiary’s bank loan	(2,148		)
Proceeds related to treasury stock obtained during settlement	—			20
Proceeds from/repayments on notes payable from related party	3,745			—
Cash used by financing activities	(2,444		)	(1,838		)
Net increase (decrease) in cash and cash equivalents	4,036			(616		)
Cash and cash equivalents at beginning of period	1,713			1,898
Cash and cash equivalents at end of period	$	5,749		$	1,282

Non-cash investing and financing activities:
Sale of GoVideo Intellectual Property	$	9,300		-

-The 5accompanying notes -are an integral part of these unaudited condensed consolidated financial statements.

~~OPTA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~6

~~Note~~OPTA 1CORPORATION —AND ~~Basis of Presentation~~ SUBSIDIARIES

~~The~~NOTES ~~accompanying unaudited condensed~~TO ~~consolidated~~CONSOLIDATED ~~financial~~FINANCIAL statements have been prepared by Opta Corporation (formerly Lotus Pacific, Inc.) (“Opta” or “Company”) in accordance with generally accepted accounting principles and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements, prepared in accordance with accounting principles generally accepted in the United States, have been condensed or omitted pursuant to such rules and regulations. However, we believe the disclosures in these financial statements are adequate to ensure the information presented is not misleading. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended June 30, 2004, which was filed with the SEC on February 18, 2005. STATEMENTS

~~In the opinion of management, the~~Note ~~unaudited~~1 ~~condensed~~— ~~consolidated~~Basis ~~financial statements contain all adjustments, consisting only~~ of ~~normal recurring adjustments, necessary for a fair presentation of our financial position, results of operations and cash flows.~~ Presentation

The ~~results~~accompanying ofunaudited ~~operations~~condensed ~~for the~~consolidated ~~interim~~financial ~~periods~~statements ~~presented~~have ~~are~~been ~~not~~prepared ~~necessarily~~by ~~indicative~~Opta ofCorporation ~~the~~(“Opta” ~~results~~or ~~of operations that~~“Company”) ~~may~~in beaccordance ~~reported~~with ~~for~~generally ~~any~~accepted ~~other~~accounting ~~interim~~principles ~~period~~and orpursuant ~~for~~to the rules and ~~entire~~regulations ~~year~~of ~~ending~~the ~~June~~Securities ~~30,~~and ~~2005~~Exchange Commission (“SEC”). Certain ~~The~~information ~~balance~~and ~~sheet~~footnote atdisclosures ~~June~~normally 30included in financial statements, prepared ~~2004~~in ~~has~~accordance ~~been~~with ~~derived~~accounting ~~from~~principles ~~the~~generally ~~audited~~accepted ~~financial~~in ~~statements~~the atUnited ~~that date~~States, ~~but~~have ~~does~~been ~~not~~condensed ~~include~~or ~~all~~omitted ofpursuant ~~the~~to ~~information~~such rules and regulations. ~~footnotes~~However, ~~required~~we ~~by accounting~~believe ~~principles~~the ~~generally~~disclosures ~~accepted~~ in these financial statements are adequate to ensure the ~~United~~information ~~States~~presented ~~for~~is ~~complete~~not ~~financial~~misleading. The unaudited condensed consolidated financial statements, asshould ~~permitted~~be byread ~~SEC~~in conjunction ~~rules~~with ~~and~~the ~~regulations~~consolidated ~~for~~financial ~~interim~~statements ~~reporting.~~and ~~Certain~~notes ~~prior~~thereto ~~period~~included ~~amounts~~in ~~have~~our ~~been~~Annual ~~reclassified~~Report toon ~~conform~~Form 10-K tofor the ~~current~~year ~~period~~ended ~~presentation. Such~~June 30, ~~reclassifications~~2005, ~~had~~which nowas ~~effect~~filed onwith the ~~results~~SEC ofon ~~operations.~~March 14, 2006.

~~The~~In ~~accompanying condensed consolidated financial statements include~~ the ~~accounts~~opinion of ~~Opta~~management, ~~and~~the ~~its~~unaudited ~~subsidiaries. All~~condensed ~~significant intercompany transactions and balances have been eliminated. Subsidiaries in which Opta owns at least 50% are~~ consolidated, ~~except~~financial ~~for~~statements ~~investments~~contain ~~where~~all ~~control is deemed to be temporary~~adjustments, inconsisting ~~which~~only ~~case the equity method~~ of ~~accounting is used. Equity~~ ~~investments~~normal inrecurring ~~which Opta owns at least 20% of the voting securities are accounted for using the equity method~~adjustments, ~~except~~necessary for ~~investments~~a ~~that~~fair ~~the~~presentation ~~Company~~of ~~is not able to exercise~~our ~~significant~~financial ~~influence over the investee~~position, inresults ~~which case, the cost method~~ of ~~accounting~~operations ~~is used.~~and ~~The~~cash ~~cost method of accounting is used for all investments in which Opta owns less than 20%~~flows.

AsThe results of ~~March~~operations ~~31,~~for ~~2005,~~the ~~our~~three ~~only significant~~and ~~operating subsidiary was Opta Systems, LLC a Delaware LLC (“Opta~~nine ~~Systems”~~months orended ~~“GoVideo”). GoVideo~~March 31, ~~established~~2006 inare ~~1984,~~not ~~designs~~necessarily ~~and manufactures~~indicative ~~product~~of ~~lines in~~ the ~~consumer~~results of ~~electronics~~operations ~~industry,~~that ~~including~~may ~~MP3~~be ~~Rave~~reported ~~MP branded~~for ~~players,~~any ~~digital~~other ~~video~~interim ~~disc~~period ~~(“DVD”)~~or ~~players,~~for ~~portable DVDs, DVD-Video~~the ~~Cassette~~entire ~~Recorder~~year ~~(“VCR”)~~ending ~~Combos~~June 30, ~~Dual-Deck~~2006. ~~VCRs,~~The ~~DVD~~balance ~~Recorders,~~sheet ~~DVD~~as ~~Recorder~~of ~~+ VCRs~~June 30, 2005 ~~and~~has ~~LCD~~been ~~TVs.~~derived ~~GoVideo~~from ~~holds~~the ~~various~~audited ~~patents~~financial ~~covering~~statements ~~Dual-Deck~~at ~~technology~~that asdate, ~~well as~~but ~~other~~does ~~electronics~~not ~~products~~include ~~and~~all ~~systems.~~of ~~GoVideo~~the ~~was~~information ~~purchased~~and asfootnotes ~~part~~required ofby ~~the~~accounting ~~Company’s~~principles ~~strategic~~generally ~~direction~~accepted ~~of investing~~ in ~~companies which will benefit from~~ the ~~Company’s~~ ~~strategic~~United ~~relationships~~States ~~with~~for ~~Asian~~complete ~~consumer electronic manufacturers. We~~financial ~~owned~~statements, ~~100%~~as ofpermitted ~~GoVideo~~by ~~during~~SEC ~~all~~rules and ~~periods~~regulations ~~presented.~~for interim reporting

AsThe ofconsolidated ~~March~~balance ~~31,~~sheet ~~2005,~~as weof ~~had one significant non-operating subsidiary~~June 30, ~~Correlant Communications, Inc. (formerly TurboNet~~ ~~Communications,~~2005 ~~Inc.)~~has ~~(“Correlant”).~~been Inprepared ~~March~~to ~~1999,~~present the ~~Company~~financial ~~acquired~~position ~~94.5%~~ of ~~the~~Opta’s ~~issued~~continuing business and ~~outstanding~~to ~~common~~provide ~~shares~~comparative offinancial ~~Correlant~~information ~~representing~~to ~~an 81% ownership~~March 31, ~~interest~~2006. ~~Correlant~~The ~~designed,~~financial ~~developed~~statements ~~and~~have ~~marketed~~been ~~telecommunications~~restated ~~products~~ to ~~cable operators,~~disclose ~~network service providers, and communications network users in~~ the ~~United~~assets, ~~States~~liabilities and ~~Asian~~results ~~countries. As a result~~ of ~~declining~~operations ~~margins~~related ~~and~~to ~~demand for its products, Correlant’s Board of Directors approved~~ the ~~wind down and cessation of Correlant~~Company’s ~~historical operations in the cable modem business effective December 23,~~subsidiary ~~2003.~~ Correlant, ~~together with Opta~~Communications, ~~will~~Inc ~~continue~~(“Correlant”) to(see ~~explore~~discussion ~~either~~below) ~~acquiring~~as ordiscontinued ~~investing~~operations in ~~other~~the ~~businesses~~accompanying tofinancial ~~utilize its assets~~statements. ~~As of March 31, 2005, we owned 73.6% of Correlant’s outstanding common stock, which represented a 62.5% ownership interest.~~

-Certain 6prior -period amounts have been reclassified to conform to the current period presentation. Such reclassifications had no effect on previously reported results of operations.

~~OPTA~~As ~~CORPORATION~~of ~~AND~~March 31, ~~SUBSIDIARIESNOTES~~2006, TOwe ~~CONSOLIDATED~~had ~~FINANCIAL~~two ~~STATEMENTS~~operating subsidiaries: Opta Systems, LLC d/b/a GoVideo (“Opta Systems” or “GoVideo”) and Go Video DigiTech (Huizhou) Co., Ltd. (“DigiTech”). In August 2005, the board of directors and shareholders of our non-operating subsidiary, Correlant, approved the dissolution of Correlant.

~~Note~~Significant 2Accounting ~~– Liquidity and Going Concern~~ Policies

The ~~Company~~consolidated ~~incurred~~financial astatements ~~net~~include ~~loss~~the accounts of Opta and its subsidiaries. All significant intercompany ~~$12~~transactions and balances have been eliminated. Subsidiaries in which Opta owns at least 50% are consolidated,~~632~~ except for investments in which control is deemed to be temporary,~~000~~ ~~during~~in which case the ~~nine~~equity ~~months~~method ~~ended~~of ~~March~~accounting ~~31,~~is ~~2005~~used. AtEquity investments ~~March~~in ~~31,~~which ~~2005,~~Opta owns at least 20% of the ~~Company~~voting securities are ~~had~~accounted anfor ~~accumulated~~using ~~deficit~~the ofequity ~~$118~~method,~~243,000~~ ~~and~~except ~~the~~for ~~Company’s~~investments ~~sole~~in ~~operating~~which the ~~subsidiary,~~Company ~~GoVideo~~is not able to exercise significant influence over the investee, ~~was~~in which case, ~~and~~the ~~still~~cost method of accounting is, used. The cost method of accounting is used for all investments in ~~default~~which ~~under~~Opta ~~certain~~owns ~~debt~~less ~~covenant~~than ~~provisions~~20%. As ofsuch, ~~its~~the ~~line~~accounts of ~~credit.~~our subsidiaries, GoVideo isand ~~currently~~DigiTech, ~~under~~have abeen consolidated. ~~forbearance~~Since ~~agreement~~the ~~with~~approval ~~its~~of ~~lender~~Correlant’s dissolution, we can no longer ~~which~~exercise ~~commenced~~significant ~~March~~influence 1over Correlant’s operations. As a result, ~~2005~~from the ~~and~~date isthat ~~due~~Correlant’s todissolution ~~expire~~was onapproved ~~August~~in 31August 2005, until the dissolution of Correlant in December 2005., ~~See~~we ~~note~~accounted ~~10.~~for Correlant using the cost method of accounting.

Additionally, in June 2003 GoVideo borrowed substantial funds from T.C.L. Industries Holdings (H.K.) Limited (“TCL Industries”), the majority stockholder of Opta, and Asia Focus Industrial Ltd., an entity affiliated with TCL Industries. The purpose of the loans was to fund inventory purchases and operating expenses. Both loans, which are subordinate to GoVideo’s line of credit, became due during fiscal year 2004. GoVideo was unable to pay off the loans and extended the due date three times. The current due date for the loan with TCL Industries is July 24, 2005. The current due date for the loan with Asia Focus Industrial Ltd. is August 11, 2005. Both loans are collateralized by 100% of the Common and Preferred Series D stock of Correlant Communications owned by Opta. There can be no assurance that GoVideo will be able to pay the loans when they mature or that another extension can be successfully negotiated. 7

~~During fiscal 2004, Opta entered into~~Note a2 ~~financing~~— ~~agreement~~Going ~~with~~Private TCL Industries. Opta ultimately loaned the funds to GoVideo to fund inventory purchases and operating expenses. The financing agreement has been extended three times with a current maturity date of July 21, 2005. The loan is collateralized by 100% of the Common and Preferred Series D stock of Correlant Communications owned by Opta. Transaction

~~The~~Opta ~~above~~is ~~matters~~currently ~~raise substantial~~taking ~~doubt~~steps ~~about~~(“Going ~~the~~Private ~~Company’s~~Transaction”) ~~ability~~ to ~~continue~~complete as a ~~going~~corporate ~~concern.~~reorganization ~~Although~~that will enable Opta ~~expects~~ to ~~incur~~become ~~additional~~a ~~losses~~non-reporting ~~during~~company with the ~~remainder~~Securities ofand Exchange ~~fiscal~~Commission ~~2005,~~ (the ~~Company believes that it will have sufficient resources to continue normal operations~~“Commission”). The ~~Company has~~purpose ~~taken steps to reorganize certain aspects~~ of ~~its~~the ~~business.~~Going ~~GoVideo~~Private ~~replaced~~Transaction ~~its~~is ~~Chief Executive~~to ~~Officer~~enable ~~with the Chief Operating Officer of~~ Opta ~~on an interim basis~~ to ~~further~~ ~~evaluate~~terminate ~~the~~its ~~ongoing~~Periodic ~~operations~~Reporting ofObligations ~~GoVideo.~~and ~~Additionally,~~continue ~~GoVideo~~future ~~has~~operations ~~undertaken cost~~as ~~reduction~~a ~~efforts,~~private ~~including reducing staff~~company, ~~realigning~~and alleviating the ~~roles~~costs, ~~and~~administrative ~~responsibilities~~burdens ofand ~~management~~competitive ~~and~~disadvantages ~~reducing~~associated ~~other~~with operating ~~expenses~~as ina anpublic ~~attempt~~company. Opta intends to ~~return~~accomplish tothis ~~profitability.~~purpose by Ifreducing the ~~Company~~number isof ~~unable~~holders toof ~~return~~record to ~~profitability~~fewer asthan a300 ~~result~~by ofcashing ~~this realignment,~~out ~~additional~~certain ~~steps~~stockholders ~~including,~~as ~~but~~described ~~not~~in ~~limited~~our ~~to,~~preliminary ~~further~~Schedule ~~cost~~14C ~~reductions~~filed ~~and eliminating~~with ~~some~~the ofCommission ~~its~~on ~~current activities~~May 4, ~~may be necessary.~~ 2006

~~The~~Because ~~consolidated~~the ~~financial~~results ~~statements~~of a Going Private Transaction are more predictable doand ~~not~~automatic ~~include~~as ~~any~~compared ~~adjustments~~to ~~relating~~other alternatives of ways to complete the ~~recoverability~~process of ~~and~~going ~~classification~~private, our Board of ~~recorded~~ ~~asset~~Directors ~~amounts~~believes orthat the ~~amount~~Going Private Transaction is the most expeditious and ~~classification~~economical way of ~~liabilities~~reducing orthe ~~any~~number of ~~other~~holders of record to fewer than 300 thereby positioning us to effect the ~~adjustment~~termination ~~that~~of ~~might~~our bePeriodic ~~necessary~~Reporting ~~should~~Obligations. The Going Private Transaction will become effective once we clear all comments with the ~~Company~~Staff beof the ~~unable~~Commission, tofile ~~continue~~our asdefinitive Schedule 14C and Schedule 13E-3, consummate the Going Private Transaction and file a ~~going~~Form 15— Certification ~~concern.~~and Notice of Termination of Registration.

Note 3 –— ~~Recently Issued Accounting Standards~~ Inventories

InInventories ~~November 2004,~~are ~~the~~stated ~~Financial~~at ~~Accounting~~the ~~Standards~~lower ~~Board (“FASB”) issued Statement~~ of ~~Financial~~cost ~~Accounting Standards~~ (~~“SFAS”) 151~~first-in, ~~Inventory Costs (“SFAS 151”~~first-out), ~~which revised~~or ~~Accounting~~market ~~Research Bulletin (“ARB”) 43, relating to inventory costs~~value. ~~This~~ ~~revision~~As ~~is to clarify the accounting for abnormal amounts~~ of ~~idle facility expense~~March 31, ~~freight~~2006, ~~handling~~inventories ~~costs~~consist ~~and~~of ~~wasted~~service ~~material~~replacement ~~(spoilage).~~parts ~~SFAS~~and ~~151~~consumer ~~requires that these items~~electronics beon ~~recognized~~hand asand ~~a current period charge regardless of whether they meet the criterion specified~~ in ~~ARB~~transit ~~43.~~from ~~In addition, this Statement requires~~ the allocation of fixed production overheads to the costs of conversion be based on normal capacity of the production facilities. SFAS 151 is effective for inventory costs incurred during fiscal years beginning after June 15manufacturer, ~~2005.~~which Weare dogenerally ~~not~~purchased ~~believe the adoption of SFAS 151 will~~FOB ~~have~~shipping ~~a material impact on our financial statements~~point.

InThe ~~December 2004,~~Company ~~the~~provides ~~FASB issued~~inventory ~~SFAS~~reserves ~~123R,~~for ~~Share-Based Payment (“SFAS 123R”) which is a revision~~estimated ofobsolescence ~~SFAS~~or ~~123~~unmarketable ~~and~~inventory ~~supersedes~~equal ~~Accounting Principles Board (“APB”) 25, Accounting for Stock Issued~~ to ~~Employees (“APB 25”). Among other items, SFAS 123R eliminates~~ the ~~use~~difference ofbetween ~~APB 25 and~~ the ~~intrinsic value method~~ cost of ~~accounting,~~inventory and ~~requires companies to recognize~~ the ~~cost~~estimated ofrealizable ~~employee~~value ~~services~~based ~~received~~upon inassumptions ~~exchange for awards of~~about ~~equity~~future ~~instruments,~~demand ~~based~~and onmarket ~~the grant date fair value of those awards, in the financial statements~~conditions. The ~~effective~~activity date of SFAS 123R is the first reporting period beginning after June 15, 2005. SFAS 123R permits companies to adopt its requirements using either a “modified prospective” method, or a “modified retrospective” method. Under the “modified prospective” method, compensation cost is recognized in the ~~financial~~ ~~statements~~allowance ~~beginning with the effective date, based on the requirements of SFAS 123R~~ for ~~all share-based payments granted after that date,~~ obsolete and ~~based~~excess oninventory ~~the~~is ~~requirements of~~shown ~~SFAS~~below 123 for all unvested awards granted prior to the effective date of SFAS 123R. Under the “modified retrospective” method, the requirements are the same as under the “modified prospective” method, but also permits entities to restate financial statements of previous periods based on proforma disclosures made (in ~~accordance with SFAS 123.~~ thousands):

- 7 -

Balance, June 30, 2005	$	3,964
Expense/(Recovery)	1,033
Write off and other	(4,639		)
Balance, March 31, 2006	$	358

~~OPTA~~Due ~~CORPORATION~~to ~~AND~~the ~~SUBSIDIARIES~~shut down of GoVideo’s historical operations, inventories and the related allowance as of March 31, 2006 were written off. At March 31, 2006, inventories and related allowance for obsolete and excess inventory relate to DigiTech.

~~NOTES~~Note 4 TO— ~~CONSOLIDATED~~Restructuring ~~FINANCIAL~~Charges ~~STATEMENTS~~and Related Transactions

~~The~~During ~~Company~~the ~~currently~~first ~~utilizes a~~quarter ~~standard~~of ~~option~~fiscal ~~pricing model (i.e.~~2006, ~~Black-Scholes)~~Opta’s tomanagement ~~measure~~and ~~the~~board ~~fair~~of ~~value~~directors ofapproved ~~stock~~and ~~options~~implemented ~~granted~~plans to ~~Employees.~~restructure ~~While~~certain ~~SFAS~~operations ~~123R~~of ~~permits~~GoVideo ~~entities~~with tothe ~~continue~~intent of toreducing ~~use~~GoVideo’s ~~such~~working ~~a model~~capital requirements, ~~the~~better ~~standard~~managing ~~also~~GoVideo’s cost ~~permits~~structure ~~the~~and ~~use~~aligning certain of aits ~~“lattice”~~operations ~~model.~~more ~~The~~effectively ~~Company~~with ~~has~~the ~~not~~current ~~yet~~economic ~~determined~~conditions ~~which~~in ~~model it will use to measure~~ the ~~fair~~consumer ~~value~~electronics ofindustry. The ~~employee~~restructuring ~~stock options~~included ~~upon~~ the ~~adoption of SFAS 123R.~~ following:

~~The Company currently expects to~~· Sale ~~adopt SFAS 123R effective July 1, 2005. However, because the Company has not yet determined which~~ of ~~the~~GoVideo’s ~~aforementioned~~intellectual ~~adoption methods it will use, the Company has not yet determined the impact of adopting SFAS 123R.~~ property;

~~Note~~· Restructuring GoVideo’s 4line –of ~~Stock-Based Compensation~~credit; and

~~SFAS 123, Accounting for~~· Restructuring Stock-Based Compensation (“SFAS 123”) encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value. The Company elected to continue to account for stock-based compensation using the intrinsic value method prescribed in APB 25 and related Interpretations. Under APB 25 and the intrinsic value method, the exercise price of the CompanyGoVideo’s employee stock options equals the market price of the underlying stock on the date of grant or, in the case of the Company’s employee stock purchase plans since the plans are non-compensatory, no compensation expense is recognizedoperations. In December 2002, the FASB issued SFAS 148, Accounting for Stock-Based Compensation—Transition and Disclosure (“SFAS148”). SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results.

~~In accordance with SFAS 148~~Hereafter, the ~~following~~ ~~table~~above ~~illustrates the effect on the Company’s net loss and loss per share~~three astransactions ifare ~~the~~referred ~~Company had applied the fair value recognition provisions of SFAS 123~~ to ~~its stock-based~~collectively ~~employee~~as ~~compensation awards, and recognized expense over~~ the ~~applicable~~“Fiscal ~~award vesting~~2006 ~~period (in thousands, except per share amounts):~~ GoVideo Restructuring.”

	Three Months Ended March 31,					Nine Months Ended March 31,
	2005			2004		2005			2004
Net loss, as reported	$	(5,677	)	$ (638	)	$	(12,632	)	$	(3,483	)
Add: Stock-based employee compensation
expense (reversal) included in reported net loss		--		--			--			(76	)
Less: Stock-based employee compensation
(expense) reversal determined under
fair value based method for all awards,
net of related tax effects		--		(23	)		--			180
Pro-forma net loss	$	(5,677	)	$ (661	)	$	(12,632	)	$	(3,379	)
Basic and diluted net loss per share, as
reported	$	(0.11	)	$ (0.01	)	$	(0.25	)	$	(0.06	)
Pro-forma basic and diluted net loss per
share	$	(0.11	)	$ (0.01	)	$	(0.25	)	$	(0.06	)

~~The~~Sale ~~pro-forma effect for the years presented is not likely to be representative~~ of ~~the~~GoVideo’s ~~pro-forma effect on reported net~~Intellectual ~~income or loss in future years because these amounts reflect less than four years of vesting.~~ Property

-Pursuant 8to -a purchase and sale agreement dated July 26, 2005 (the “TCLMM Agreement”) among GoVideo, TCL Multimedia Technology Holdings Limited, a Cayman Islands company with shares listed on the Stock Exchange of Hong Kong Limited (“TCLMM”), TCL Industries (H.K.) Holdings Limited (“TCL”), Asia Focus Industrial Limited (“Asia Focus”) and Opta, TCLMM agreed to assume the debt obligations owed by GoVideo to TCL and Asia Focus under three promissory notes, with obligations totaling approximately $11,000,000 at July 26, 2005 (“Existing Obligations”). The Existing Obligations were previously guaranteed by Opta, and secured by Opta’s pledge of 100% of the Common Stock and Series D preferred stock of Correlant, held by Opta. Pursuant to the TCLMM Agreement, TCL and Asia Focus released Opta’s obligations as guarantor under the Existing Obligations and released Opta’s pledge of the Correlant shares.

~~OPTA~~In ~~CORPORATION~~consideration ~~AND~~for ~~SUBSIDIARIES~~TCLMM’s assumption of the Existing Obligations, GoVideo (i) assigned to TCLMM all of GoVideo’s right, title and interest in and to certain significant intellectual property assets of GoVideo (the “GoVideo IP”) and (ii) issued a promissory note in favor of TCLMM (the “TCLMM Note”) for an initial principal amount of $1,000,000, representing the difference between the preliminary value of the GoVideo IP, as determined by a third-party appraiser, and the Existing Obligations assumed by TCLMM. A subsequent independent appraisal of the GoVideo IP was completed, which reduced the final valuation of the GoVideo IP by $700,000. As a result, the TCLMM Note automatically increased to $1,700,000. In February 2006, GoVideo paid the TCLMM Note in full. The total principal and interest paid was approximately $1,726,000.

~~NOTES~~Under TOthe ~~CONSOLIDATED~~TCLMM ~~FINANCIAL~~Agreement, ~~STATEMENTS~~TCLMM granted to GoVideo a 90-day, non-exclusive, worldwide license to use the GoVideo IP on a royalty-free basis. On August 30, 2005, GoVideo and TCLMM entered into an exclusive license agreement (“TCLMM License Agreement”) through October 24, 2008, with an automatic renewal for subsequent two year terms unless terminated by either party by ninety days written notice of intention not to renew. Under the terms of the agreement, GoVideo agreed to pay TCLMM a royalty based on the cost of goods sold in connection with the distribution, sale, advertising and promotion of certain consumer electronics products under the GoVideo tradename. The TCLMM License Agreement was subsequently terminated. See “Restructuring GoVideo’s Operations” below.

~~Note~~In 5connection –with ~~Basic~~the ~~and~~sale of GoVideo’s IP, the ~~Diluted~~Company ~~Net~~recorded ~~Income~~a ~~(Loss)~~gain ~~Per~~of ~~Share~~$6,505,000 included in Other income in the consolidated statement of operations during the nine months ended March 31, 2006 as follows:

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock and common stock equivalents outstanding during the period. There were no employee stock options, common stock warrants outstanding or shares contingently issuable in connection with share exchange agreements as of March 31, 2005 or 2004.

Appraised value of GoVideo’s IP	$	9,300,000
Book value of GoVideo’s IP	(2,486,000		)
Selling expenses	(309,000		)
Gain on sale of GoVideo IP	$	6,505,000

~~Note~~TCLMM 6and ~~– Comprehensive~~Asia ~~Income~~Focus ~~(Loss)~~are affiliates of TCL, the majority stockholder of the Company.

~~Comprehensive~~Restructuring ~~income (loss) consists of net income (loss) and other gains (losses) affecting shareholders~~GoVideo’ equity that, under generally accepted accounting principles are excluded from net income (loss) in accordance with SFAS 130, Reporting Comprehensive Income (“SFAS 130”). Other comprehensive income (loss) includes unrealized gains (losses) on marketable securities and foreign currency translation adjustments. The following table computes the Company’s ~~comprehensive~~Line ~~loss~~of ~~(in thousands):~~ Credit

	Three Months Ended March 31,						Nine Months Ended March 31,
	2005			2004			2005			2004
Net loss, as reported	$	(5,677	)	$	(638	)	$	(12,632	)	$	(3,483	)
Opta's portion of the change in Correlant's unrealized
gain (loss) on short term investments		(53	)		33			(43	)		(5	)
Comprehensive loss	$	(5,730	)	$	(605	)	$	(12,675	)	$	(3,488	)

Pursuant to a Participation Agreement (the “Participation Agreement”) between Opta and Wells Fargo Business Credit, a division of Wells Fargo Bank, NA (“Wells”), Opta acquired an 80% participation interest in the credit facility of GoVideo, under the Credit and Security Agreement dated July 21, 2003, as amended to date (the “Wells Credit Agreement”) between GoVideo and Wells. On October 13, 2005, Opta amended the Participation Agreement to provide for revolving advances in an amount up to $2,000,000 over the borrowing base (such revolving advances over the borrowing base to be referred to as “Overline Advances”) and as a result, the participation percentage was 80% with respect to the revolving advances that are not Overline Advances and 100% with respect to Overline Advances. The maximum amount of the line of credit remained at $4,000,000. Concurrently with the purchase of the participation and Opta’s collateral deposit of $800,000 in cash collateral to secure its obligations and guaranty of the Wells Credit Agreement, Wells released its lien on the intellectual property assets of GoVideo under the Wells Credit Agreement.

~~Note 7 – Restructuring Charges~~ 9

~~During~~Pursuant ~~the~~to ~~second~~a ~~quarter~~forbearance ofagreement ~~fiscal~~dated July 22, 2005, most ~~2004~~recently amended January 20, ~~Correlant’s~~2006 ~~board~~(as ofdiscussed ~~directors~~below), ~~approved~~between GoVideo and Wells (the ~~wind~~“Forbearance ~~down~~Agreement”), Wells agreed to forbear from exercising its rights and ~~cessation~~remedies with respect to existing defaults under the Wells Credit Agreement from the date of the agreement through January 27, ~~Correlant’s~~2006 ~~historical~~and ~~operations~~modify incertain terms of the ~~cable~~Wells ~~modem~~Credit Agreement, including reducing the maximum line of credit to $4,000,000 and ~~CMTS~~waiving ~~business~~the termination fee. InWells also ~~connection~~agreed that defaults by GoVideo under financial covenants in the Wells Credit Agreement and with respect to material adverse changes will not constitute new defaults under that agreement. As a condition to the ~~shut~~forbearance by ~~down~~Wells, ~~Correlant~~GoVideo ~~recorded~~agreed ato ~~restructuring~~pay ~~charge~~to Wells a fee of $1300,~~845~~000 by adding to the loan’s principal balance in two installments, $150,000 ~~during~~on ~~fiscal~~September 2, ~~2004.~~2005 ~~The~~and ~~following~~$150,000 ~~table~~on ~~summarizes~~January 4, ~~the~~2006. ~~activity~~Opta inagreed ~~Correlant’s~~to ~~reserves~~enter ~~associated~~into the ~~with~~Participation ~~its~~Agreement ~~shut~~and ~~down~~to deposit 20% of ~~historical~~the ~~operations~~loan (value in ~~thousands):~~cash collateral to secure Opta’s guaranty as described above.

	Separation costs for terminated employees and contractors			Facilities closing			Other			Total restructuring charges
Balance at June 30, 2003	$	--		$	--		$	--		$	--
Fiscal 2004 restructuring charges		890			583			372			1,845
Cash payments		(628	)		(49	)		(372	)		(1,049	)
Balance at June 30, 2004		262			534			--			796
Cash payments		(262	)		(456	)		--			(718	)
Reversal of over accrual		--			(78	)		--			(78	)
Balance at March 31, 2005	$	--		$	--		$	--		$	--

On January 27, 2006, pursuant to a Loan Sale Agreement dated January 20, 2006 between Opta and Wells, the Participation Agreement was terminated and Opta purchased the entire right, title and interest of Wells under, and Opta became the Lender under the Wells Credit Agreement. The purchase price was approximately $2,148,000, which consisted of the following: $2,113,000 principal, $23,000 interest and unused line of credit fees, and $12,000 legal and audit fees incurred by Wells. The full amount of Opta’s participation interest was credited against such purchase price. On February 1, 2006, Opta, as such Lender, and GoVideo further amended the Forbearance Agreement to extend the Forbearance Period to April 30, 2006, and to terminate the guaranty and the subordination agreement previously delivered by Opta to Wells under the Credit Agreement. On April 30, 2006, Opta further extended the Forbearance Period to October 30, 2006. The loan, principal, interest and related fees, between Opta and GoVideo has been eliminated on the consolidated financial statements as of and for the period ended March 31, 2006.

~~Note~~Restructuring 8GoVideo’s ~~–Litigation Settlement~~ Operations

OnDuring the ~~July 30,~~first ~~2004,~~quarter ~~Correlant reached~~of afiscal ~~settlement~~2006, ~~agreement~~GoVideo ~~with~~began ~~one~~shutting ofdown its ~~stockholders~~historical operations ~~and~~as ~~major~~an ~~vendors,~~original ~~TurboComm Technologies,~~equipment ~~Inc~~manufacturer (“~~TurboComm~~OEM”). ~~Under~~because the ~~agreement,~~business model ~~Correlant~~required ~~dismissed~~significant ~~its lawsuit~~working ~~against~~capital ~~TurboComm~~to meet inventory needs and inalso carried ~~exchange~~a ~~Turbocomm~~substantial ~~transferred~~risk ~~700,000~~of ~~shares~~obsolete inventory. The shut down of ~~Series~~GoVideo’s historical Aoperations as a consumer electronics OEM was substantially completed ~~Preferred~~by ~~Stock~~January 31, 2006. In anticipation of ~~Correlant and~~implementing ~~300~~a new business model as a brand licensing provider for domestic retail consumer electronics,~~000~~ ~~shares~~GoVideo entered ofthe ~~Series~~TCLMM CLicense ~~Preferred~~Agreement ~~Stock~~as discussed above. However, on December 28, 2005, TCLMM notified GoVideo of ~~Correlant~~its ~~owned~~intention byto ~~TurboComm~~exercise its right to ~~Correlant.~~unilaterally ~~Both~~terminate ~~parties~~the ~~mutually~~agreement without ~~agreed~~cause upon ninety days’ written notice pursuant to ~~release~~the ~~and~~terms of the ~~discharge~~agreement. GoVideo ~~any~~agreed ~~and~~to ~~all~~terminate the ~~claims~~agreement ~~that~~effective ~~each~~as ~~may~~of ~~have~~January 12, ~~against~~2006 ~~the~~in ~~other~~order ~~party.~~for ~~This~~Opta ~~transaction~~to ~~resulted~~continue inthe brand licensing business under a ~~$1,946,000~~new ~~recovery~~license agreement with TCLMM discussed below. Subsequent to the shut down of ~~bad~~GoVideo’s ~~debt~~historical ~~included~~operations inand ~~Selling~~the termination of the TCLMM License Agreement, ~~general~~GoVideo’s short term business plan has focused on collecting receivables and managing liabilities that remain outstanding from ~~administrative~~GoVideo’s ~~expense~~historical operations. Currently, GoVideo has no business plan that generates revenue. If GoVideo does not identify and successfully implement a ~~$774~~longer term business plan that generates revenue,~~000~~ ~~gain~~GoVideo ~~included~~will inbe ~~Other~~shut ~~income~~down. ~~(expense)~~If onGoVideo is shutdown and has any assets subsequent to the shutdown, the assets will be combined with the ~~consolidated~~proceeds ~~statement~~from the liquidation of ~~operations~~Correlant ~~for~~and used to identify market opportunities that will complement the ~~nine~~Company’s ~~months~~business ~~ended~~and ~~March~~long-term strategies ~~31,~~while ~~2005.~~leveraging the Company’s significant experience in the consumer electronics market.

-Opta’s 9Entry -into a Material Definitive Agreement

~~OPTA~~Concurrent ~~CORPORATION~~with ~~AND~~GoVideo’s ~~SUBSIDIARIES~~termination of its licensing agreement with TCLMM, discussed above, on January 12, 2006, Opta and TCLMM entered into an exclusive license agreement through August 31, 2008, which includes the right to sublicense. The agreement automatically renews for subsequent two year terms unless terminated by either party by one hundred eighty days written notice of intention not to renew. Under the terms of the agreement, Opta will pay TCLMM a royalty based on the cost of goods sold in connection with the distribution, sale, advertising and promotion of certain consumer electronics products under trademarks associated with the GoVideo tradename.

~~NOTES~~Opta entered TOthe ~~CONSOLIDATED~~above ~~FINANCIAL~~agreement ~~STATEMENTS~~as part of the Company’s consolidated strategic shift toward becoming a brand

On August 31, 2004 Opta reached a settlement agreement with TurboComm. Under the agreement, TurboComm paid Opta $20,000 and delivered 686,000 shares of Opta, constituting all shares owned by TurboComm. Both parties mutually agreed to release and discharge any and all claims that each may have against the other party. This transaction resulted in an $88,000 gain included in Other income (expense) on the consolidated statement of operations for the nine months ended March 31, 2005. 10

~~Note~~licensing provider 9for –domestic ~~Line~~retail consumer electronics. The GoVideo name has been positioned in the consumer electronics industry to connote high performance products that incorporate advanced technology, ease of use, and superior ~~Credit~~industrial design since 1984. As such, Opta management intends to capitalize on the brand name recognition and sublicense the GoVideo brand name by bridging international manufacturers of consumer electronics to domestic retailers. Opta will sublicense the GoVideo tradename to third party licensees who produce, market and sell their consumer electronics products bearing the GoVideo tradename. Opta plans to choose its licensees carefully and impose upon such licensees various restrictions on the products, and on the manner, on which the GoVideo name may be used. In addition, the Company will require its licensees to abide by certain standards of conduct and the laws and regulations of the jurisdictions in which they do business. However, if a licensee fails to adhere to these requirements, the GoVideo brand could be damaged. The GoVideo brand could also be damaged if a licensee becomes insolvent or by any negative publicity concerning a licensee or if the licensee does not maintain good relationships with its customers or consumers.

~~On November 1, 2004, GoVideo entered~~As ~~a forbearance agreement (“Agreement”) with its line~~ of ~~credit~~the ~~lender.~~date ~~See Agreement details discussed at Note 20~~ of ~~our~~this ~~Annual~~report, ~~Report~~Opta onhas ~~Form~~two ~~10-K~~license asagreements ~~filed~~ with ~~the~~international ~~SEC~~consumer onelectronics ~~February 18~~manufacturers, ~~2005.~~pertaining ~~GoVideo was unable~~ to ~~cure~~ the ~~existing~~GoVideo ~~defaults~~brand, ~~under~~that ~~the terms~~cover ofdomestic ~~the~~markets. ~~Agreement~~Opta, ~~which~~with ~~expired~~the ~~February~~support ~~28,~~of ~~2005~~GoVideo, ~~and~~is ~~was~~actively ~~forced~~pursuing ~~to extend the~~new ~~forbearance~~licensees ~~agreement~~for ~~(“Amended~~both ~~Agreement”)~~domestic ~~until~~and ~~August~~international ~~31, 2005~~markets. InThere ~~the~~has been no ~~Amended~~revenue ~~Agreement,~~recognized ~~GoVideo~~from ~~agreed~~these totwo ~~the~~license ~~following~~agreements ~~significant~~as ~~conditions:~~of March 31, 2006.

•Restructuring ~~To pay all the lender's costs and expenses associated with the existing default;~~Charges

•In Toconnection ~~pay~~with the Fiscal 2006 GoVideo Restructuring, GoVideo recorded a restructuring charge of $~~100~~1,013,000 during the first quarter of fiscal 2006. During the third quarter of fiscal 2006, inGoVideo ~~installments~~recorded additional restructuring charges of $106,000 associated ~~for~~with ~~forbearance~~further ~~and~~employee ~~other~~terminations. The ~~accommodations~~following ~~provided~~table bysummarizes the ~~lender~~activity ~~under~~ in the ~~Amended~~Company’s ~~Agreement;~~consolidated reserves associated with its restructuring of GoVideo’s operations (in thousands):

• To pay no more than $100,000 toward any subordinate indebtedness; and o To not incur capital expenditures in excess of $150,000.

	Separation expenses for terminated employees and contractors			Other			Total restructuring charges
Balance at June 30, 2005	$	—		$	—		$	—
Fiscal 2006 restructuring charges	1,050			69			1,119
Cash payments	(1,026		)	(69		)	(1,095		)
Balance at March 31, 2006	$	24		$	0		$	24

The ~~Agreement~~remaining ~~also~~balance ~~called~~of ~~for~~severance ~~the~~expenses of $24,000 ~~following~~represents ~~modifications:~~remaining payments to already terminated employees in accordance with their severance agreements.

•Note 5 A— ~~reduction~~Liquidity ofand ~~the~~Going ~~maximum line to $20,000,000;~~Concern

•The ACompany ~~change~~incurred tonet losses of $2,186,000 and $7,138,000 during the ~~minimum~~three ~~net~~and ~~income~~nine ~~(loss)~~months ~~per~~ended ~~month~~March 31, ~~requirement~~2006, respectively, ~~for~~and $18,861,000 and $7,722,000 during the ~~period~~fiscal ofyears ~~February~~ended 1June 30, 2005 ~~through~~and ~~August~~2004, respectively. And at March 31, ~~2005;~~2006, ~~and~~the Company had an accumulated deficit of $131,610,000.

•The Acontinued ~~reduction~~losses, innegative working capital at March 31, 2006 of ($5,741,000) and lack of a successful business plan raise substantial doubt about the ~~borrowing~~Company’s ~~base~~ability to continue as ~~determined~~a bygoing ~~specific~~concern. ~~inventory~~The Company anticipates that its current cash and ~~receivable~~cash ~~balances~~equivalents and the ability to borrow from related parties will be sufficient to fund its operations for at least the next twelve months assuming GoVideo successfully manages its existing liabilities. See Note 12. Accordingly, if GoVideo does not successfully manage its liabilities, the Company may be forced to borrow additional funds, which could increase the risk of operating as a going concern.

The reduction of the maximum line to $20,000,000 could limit GoVideo’s ability to expand. However, this most likely will not impact GoVideo as the current operating plan does not contemplate further growth until the current operating levels return to profitability. `

~~Note 10 – Segment and Geographic Information~~ 11

~~SFAS~~The ~~131,~~consolidated Disclosures about Segments of an Enterprise and Related Information (“SFAS 131”), establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial ~~information~~statements ~~is available~~do ~~and~~not ~~is evaluated regularly by the chief operating decision maker, or decision~~include ~~making~~any ~~group.~~adjustments ~~Our~~relating ~~chief~~to ~~operating decision maker is~~ the ~~Chief~~recoverability ~~Executive Officer. We are organized geographically~~ and byclassification ~~line~~ of ~~business. While the Chief Executive Officer~~recorded ~~evaluates~~asset ~~results~~amounts inor ~~a number of different ways,~~ the ~~primary~~amount ~~basis for which the allocation of resources~~ and ~~financial~~classification ~~results are assessed is product type. During the three and nine months ended March 31, 2005 we operated in one segment through our subsidiary GoVideo, which was the distribution~~ of ~~innovative,~~liabilities ~~high~~or ~~performance~~any ~~consumer~~other ~~electronic~~adjustment ~~products.~~that ~~During~~might ~~the~~be ~~three~~necessary ~~and~~should ~~nine months ended March 31, 2004, we operated in an additional segment through our subsidiary Correlant, which was~~ the ~~development, manufacture~~Company ~~and~~be ~~distribution~~unable ofto ~~products~~continue ~~used for broadband Internet access, including~~as ~~data-over-cable~~a ~~equipment~~going ~~and digital subscriber line (“DSL”) access and networking devices and development~~concern.

-Note 106 -— Recent Accounting Pronouncements

~~OPTA~~Recent ~~CORPORATION~~accounting ~~AND~~pronouncements ~~SUBSIDIARIES~~issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants (“AICPA”), and the SEC did not or are not believed by management to have a material impact on the Company’s present or future financial statements.

~~NOTES~~Note TO7 ~~CONSOLIDATED~~— ~~FINANCIAL~~Discontinued ~~STATEMENTS~~Operations

~~The~~On July 18, 2005, the Board of Directors of ~~following~~Correlant ~~table~~approved ~~presents~~the dissolution of Correlant, pending approval by the Correlant shareholders. At a ~~summary~~Special Meeting of Shareholders held August 5, 2005, Correlant shareholders approved the ~~Company’s~~dissolution ~~businesses~~of Correlant. At the time of the dissolution, Opta held 10,000 shares of Series D preferred stock of Correlant and ~~operating~~approximately ~~segments~~13,900,000 shares of common stock of Correlant. During ~~(in~~August 2005, ~~thousands):~~Opta received liquidation proceeds of $10,000,000 for its Series D preferred stock. During December 2005, Opta received liquidation proceeds of $1,276,000 for its shares of Correlant’s common stock.

	Three Months Ended March 31,						As of or for the Nine Months Ended March 31,
	2005			2004			2005			2004
Broadband Internet access products:
Net revenues	$	--		$	87		$	--		$	604
Cost of net revenues		--			18			--			259
Gross profit		--			69			--			345
Income (loss) from operations	$	(69	)	$	(683	)	$	1,510		$	(4,273	)
Total assets							$	18,006		$	19,774
Consumer electronics:
Net revenues		18,980			31,845			108,521			88,727
Cost of net revenues		20,850			29,314			109,129			80,792
Gross profit		(1,870	)		2,531			(608	)		7,935
Income (loss) from operations	$	(4,616	)	$	592		$	(11,246	)	$	1,310
Total assets							$	42,589		$	40,812
Total operating segments:
Net revenues	$	18,980		$	31,932		$	108,521		$	89,331
Cost of net revenues		20,850			29,332			109,129			81,051
Gross profit (loss)		(1,870	)		2,600			(608	)		8,280
Income (loss) from operations attributable to operating
Segments	$	(4,685	)	$	(91	)	$	(9,736	)	$	(2,963	)
Total assets attributable to operating segments							$	60,595		$	60,587

The dissolution of Correlant, based on SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS 144”), met the criteria of discontinued operations during the first quarter of fiscal 2006. As such, the liquidation of Correlant and its related operating results have been excluded from continuing operations and classified as a discontinued operation for all periods presented in accordance with the requirements of SFAS 144.

~~Disclosed~~The infollowing ~~the table below~~ is ~~the~~a ~~reconciliation~~summary of the ~~loss~~results ~~from~~of discontinued operations ~~attributable~~relating to ~~operating~~Correlant ~~segments~~for ~~to loss from~~the ~~continuing~~three ~~operations~~and ~~before~~nine ~~income~~months ~~taxes~~ended ~~and~~March 31, ~~non-controlling~~2006 ~~interest~~ and ~~total~~2005 ~~assets attributable to operating segments to total assets~~ (in thousands):

	Three Months Ended March 31,	~~Three Months Ended March 31,~~				Nine months ended March 31,	~~As of or for the Nine Months Ended March 31,~~
		2005		2004			2005			2004
	2006		2005			2006			2005
Income (loss) from operations attributable to operating		$ (4,685)		$	(91	)	$	(9,736	)	$	(2,963	)
	(Unaudited)		(Unaudited)			(Unaudited)			(Unaudited)
segments
Selling, general and administrative expense (reversal)	$	—	$	69		$	112		$	(1,511	)
Corporate general and administrative expenses		518			615			1,564			1,969
Income (loss) from operations	—		(69		)	(112		)	1,511
Total other income (expense), net		(465)			2,283			(726	)		2,750
Interest income	—		103			77			308
Income (loss) before income taxes and non-controlling
Other income (expense)	—		—			(186		)	774
interest		$ (5,668)		$	1,577		$	(12,026	)	$	(2,182	)
Income (loss) before non-controlling interest	—		34			(221		)	2,593
Total assets attributable to operating segments							$	60,595		$	60,587
Non-controlling interest in (income) loss of consolidated subsidiaries	—		(9		)	57			(606		)
Total assets attributable to non-reporting segments								948			3,676
Income (loss) from discontinued operations	$	—	$	25		$	(164	)	$	1,987
Total assets							$	61,543		$	64,263

~~Geographic Information~~12

~~During~~The ~~the~~table ~~three and nine months~~that ~~ended~~follows ~~March~~presents ~~31,~~a ~~2005~~breakdown ~~and~~of ~~2004,~~the wemajor ~~recorded~~components ~~net~~of ~~revenues~~assets ~~throughout~~and ~~the~~liabilities of ~~U.S.,~~discontinued ~~Asia~~operations ~~and Europe~~ as ~~determined by the final destination~~ of ~~the~~June 30, ~~product.~~2005 (in thousands):

- 11 -

Assets

Cash	$	1,131
Short term investments	16,128
Notes and interest receivable from related parties, net	608
Income tax receivable	63
Other current assets	128
Total assets of discontinued operations	$	18,058

Liabilities

Accounts payable	$	10
Total liabilities of discontinued operations	$	10

~~OPTA~~Note ~~CORPORATION~~8 ~~AND~~— Notes Payable to ~~SUBSIDIARIES~~Related Parties

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~ Opta

~~The~~On ~~following~~July 5, ~~table~~2005, ~~summarizes~~Opta ~~total~~entered into a loan and ~~net~~security ~~revenues~~agreement ~~attributable~~with toCorrelant ~~significant~~for ~~countries~~$200,000 (bearing interest at 6.00% per annum, maturing on June 2, 2006 and secured by Opta’s entire ownership interest in ~~thousands):~~DigiTech. On July 26, 2005, Opta entered into an additional loan and security agreement with Correlant for $5,000,000 bearing interest at 2.75% per annum, maturing on December 31, 2005, and secured by 6,000 shares of Correlant Series D preferred stock held by Opta. On August 19, 2005 Opta repaid the entire $5,200,000 principal balance and accrued interest using the proceeds received from the Series D preferred stock liquidation as discussed above.

	Three Months Ended March 31,				Nine Months Ended March 31,
	2005		2004		2005		2004
Asia	$	283	$	47	$	519	$	378
U.S.		18,697		32,799		108,002		89,780
Europe and other
		--		40		--		127
	$	18,980	$	32,886	$	108,521	$	90,285

DigiTech

~~Presented~~On ~~below~~August 12, is2005 ~~information~~DigiTech ~~regarding~~increased ~~identifiable~~its ~~assets~~short term loan from ~~continuing~~TCL ~~operations~~to $989,000. ~~classified~~The byterms ~~operations~~of ~~located~~the original $725,000 loan, which was entered into April 19, 2005, remained in ~~the~~effect. UThe annual interest rate is 5.S2% and interest is paid monthly. Currently, the loan matures on June 30, 2006, but may be automatically extended for an additional six month terms if DigiTech and ~~Asia~~TCL ~~(in~~mutually ~~thousands):~~agree to renew the loan.

	March 31,
	2005		2004
U.S.	$	61,090	$	63,889
Asia		453		374
	$	61,543	$	64,263

Note 9 — Stock-Based Compensation

We account for our stock-based 12compensation plans under the intrinsic value method of accounting as defined by APB 25 and related interpretations. We apply the disclosure provisions of FASB 123 as amended by FASB 148, Accounting for Stock-Based Compensation—Transition and Disclosure. Although we have the ability to issue stock options to our employees and outside directors under stockholder approved stock option programs and provide employees the right to purchase our stock pursuant to employee stock purchase programs, we did not have any stock options outstanding during the three and nine months ended March 31, 2006 or 2005. As such, stock-based compensation had no effect on reported net loss and net loss per share.

~~Item~~Note 10 2 — ~~Management’s Discussion~~Basic and ~~Analysis~~Diluted ofNet ~~Financial~~Loss ~~Condition~~Per ~~and Results of Operations:~~ Share

~~You should read the following~~Basic ~~discussion~~and indiluted ~~conjunction~~net ~~with~~loss ~~Opta~~per ~~Corporation’s~~share ~~(“Opta”)~~is ~~unaudited condensed~~computed ~~consolidated~~by ~~financial~~dividing ~~statements~~net ~~and~~loss ~~notes~~by ~~included~~the ~~herein. The results~~weighted ~~described~~average ~~below~~number ~~are~~of ~~not~~shares ~~necessarily~~outstanding ~~indicative~~during of the ~~results to be expected in any future~~ period. ~~Certain~~Opta ~~statements~~had inno ~~this discussion and analysis, including statements regarding~~employee ~~our~~stock ~~strategy~~options, ~~financial~~common ~~performance~~stock ~~and~~warrants ~~revenue~~or ~~sources,~~any ~~are~~other ~~forward-looking~~common ~~statements~~stock equivalents ~~based~~outstanding during onthe ~~current~~three ~~expectations~~ and ~~entail various risks and uncertainties that could cause~~nine ~~actual~~months ~~results~~ended toMarch 31, ~~differ~~2006 ~~materially~~or ~~from those expressed in the forward-looking statements~~2005. ~~Readers~~As ~~are~~a ~~referred~~result, ~~to Opta’s Annual Report on Form 10-K~~ for ~~the~~all ~~year~~periods ~~ended June 30~~presented, ~~2004 as filed with~~ the ~~SEC~~Company’s onbasic ~~February 18, 2005~~ and todiluted ~~the~~net ~~section~~loss ~~entitled “Certain~~per ~~Factors~~share ~~That~~is ~~May Affect Future Results” contained herein which identify important risk factors that could cause actual results to differ from those contained in~~ the ~~forward-looking statements~~same.

We begin Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) with an executive overview and description of Opta’s business. The next discussion relates to our results of operations for the three and nine months ended March 31, 2005 compared to the three and nine months ended March 31, 2004. 13

~~After~~Note ~~the~~11 ~~results~~— ofComprehensive operations, we analyze the changes in our cash flows, and discuss our financial commitments in the section entitled “Liquidity and Capital Resources.” We then address current “Significant Trends” in the consumer electronics industry and our “Business Outlook” from March 31, 2005. We conclude this MD&A with (I) a discussion of the Critical Accounting Estimates we believe are important to understanding the assumptions and judgments incorporated in our reported financial results; and (II) Recently Issued Accounting Standards and the impact they had or will have on our results of operations. Loss

~~Executive~~The Company’s ~~Overview~~Other comprehensive loss includes unrealized gains (losses) on marketable securities and foreign currency translation adjustments. Opta had no ~~Description~~Other comprehensive income (loss) during the three and nine months ended March 31, 2006 as a result of ~~Business~~Correlant’s dissolution. During the three and nine months ended March 31, 2005, the Company’s Other comprehensive income (loss) was comprised of Opta’s portion of the change in Correlant’s unrealized gain (loss) on short term investments categorized as available-for-sale. The following table computes the Company’s comprehensive loss (in thousands):

Opta, a Delaware corporation, is a holding company and we conduct our business through our subsidiaries. We presently develop, manage, and operate emerging consumer electronics and communications companies, focusing on developing next generation consumer electronics and communication products. We provide our subsidiaries with capital and strategic and infrastructure services. Currently, GoVideo is our sole operating subsidiary. GoVideo’s strategy is to develop, market, and distribute innovative, high performance consumer electronic products that incorporate advanced technology, ease of use, and superior industrial design. Main products include consumer electronic products such as the MP3 Rave MP branded players, digital video disc (“DVD”)-Video Cassette Recorder Combos (“DVR”), Dual-Deck VCRs, DVD Recorders and the DVD Recorder + VCR. GoVideo’s current marketing strategy is to sell products with the support of independent sales representatives specific to certain geographic territories throughout the United States who also represent many other brand name consumer electronic products. GoVideo currently sells its product lines directly to retailers nationwide including numerous national and regional chains, catalog accounts, specialty stores, warehouse clubs and home shopping channels.

	Three Months Ended March 31,						Nine months ended March 31,
	2006			2005			2006			2005

Net loss, as reported	$	(2,186	)	$	(5,677	)	$	(7,138	)	$	(12,632	)
Opta’s portion of the change in Correlant’s unrealized gain (loss) on short term investments	—			(53		)	—			(43		)
Comprehensive loss	$	(2,186	)	$	(5,730	)	$	(7,138	)	$	(12,675	)

~~Our~~Note ~~business~~12 ~~strategy~~— in the consumer electronic segment is to leverage our significant experience in the consumer electronics market, increase the GoVideo brand recognition by introducing products in Asia, and continue our product development to bring to our customers compelling new products with superior quality and ease-of-use. Litigation

~~Two~~From oftime ~~the major challenges facing Opta are managing liquidity and rapid product price declines. Liquidity has been, and will continue~~ to ~~be,~~time ~~an issue for us as~~ we ~~have~~may ~~grown~~be ~~our~~involved ~~subsidiary,~~in ~~GoVideo, out of~~various ~~bankruptcy.~~disputes ~~Our~~and ~~majority~~litigation ~~shareholder,~~matters ~~TCL~~arising ~~Industries Holdings (H.K.) Limited (“TCL Industries”), has been instrumental~~ in ~~assisting GoVideo obtain credit from vendors, which has helped us work through some liquidity issues. We plan to continue to utilize~~ the ~~relationship~~ ~~with~~normal ~~our~~course ~~majority shareholder by sourcing more products from them. This will be a challenging and important part~~ of ~~GoVideo’s strategy to manage liquidity~~business.

~~The~~Daewoo ~~consumer~~Electronics ~~electronics industry is constantly facing new trends and challenges~~America, ~~the most prominent of which is severe price competition~~ Inc. We expect competition to intensify in the future. The rapid price declines experienced during fiscal 2005 strained our operations and financial resources. Therefore, another challenge facing GoVideo during periods of rapidly declining product sales price, is managing inventory while balancing the need to meet the demands of our customers quickly. Our strategy to combat the price competition is to continue to focus on the development of lower-cost consumer electronics, continue the evaluation of potential new products and work with our contract manufacturers to reduce the purchase price of our products.

-On 13August 14, 2005, Daewoo Electronics America, Inc. (“Daewoo”) filed a lawsuit in the Superior Court of California, County of San Mateo, Case No. CIV 448845, entitled Daewoo Electronics America, Inc., Plaintiff v. Opta Corporation and Does 1 through 25, Defendants. The Complaint in the suit alleges that Opta Corporation executed a written guaranty dated December 4, 2003 in favor of Daewoo in which Opta Corporation unconditionally guaranteed the payment of all obligations of GoVideo to Daewoo, in a principal amount not to exceed $5,000,000. Daewoo alleges that it sold GoVideo goods of an agreed purchase price in excess of $10,000,000, for which GoVideo has not paid. Daewoo alleges Opta Corporation owes Daewoo $5,000,000 in principal amount, plus interest, attorneys’ fees and costs under the guaranty. In a separate lawsuit filed in the Superior Court of California, County of San Mateo, on September 14, 2005, Case No. CIV 449577, entitled Daewoo Electronics America, Inc., Plaintiff v. Opta Systems, LLC, dba GoVideo and Does 1 through 25, Defendants, Daewoo sued GoVideo for the alleged purchase price of the goods of approximately $10,700,000, in principal amount, plus interest, attorneys’ fees and costs. Opta Corporation denies that it has any liability under the alleged guaranty. GoVideo denies that it has any liability to Daewoo. A motion to quash the service of Daewoo’s Summons and Complaint on Opta Corporation for lack of jurisdiction was taken off calendar following Daewoo’s re-service on Opta Corporation of the summons and complaint. A similar motion on GoVideo’s behalf was granted by the Court, finding that GoVideo is not subject to the jurisdiction of California courts. Opta Corporation’s demurrer challenging the legal sufficiency of Daewoo’s original Complaint was taken off calendar after Daewoo filed a First Amended Complaint on or about December 8, 2005. Opta Corporation filed a demurrer to the First Amended Complaint and Opta Corporation also filed motions to dismiss the First Amended Compliant based on the filing of the GoVideo New Jersey Action described below, or, alternatively, to stay all action on the First Amended Complaint pending the outcome of the GoVideo New Jersey Action. On March 23, 2006, the Court granted the motion to stay and took the hearing on the motion demurrer off calendar. The trial date has also been vacated. Daewoo filed a Notice of Appeal of the Court’s order staying the action on April 4, 2006. The parties are in the process of preparing the appellate record and briefing on the appeal has not yet begun. Opta Corporation intends to defend Daewoo’s suit and to pursue any and all remedies to which it may be entitled.

On November 14, 2005, GoVideo filed an ~~Results~~action in the United States District Court for the District of ~~Operations~~New Jersey, entitled Opta Systems, LLC d/b/a/ GoVideo v. Daewoo Electronics America, Inc. et al., Civil Action No. 05-5387 (JAP) (the “GoVideo New Jersey Action”), in which GoVideo brought claims against Daewoo Electronics America, Inc.

The following table summarizes certain aspects of our results of operations for the three and nine months ended March 31, 2005 compared to the three and nine months ended March 31, 2004 (in thousands): 14

	Three Months Ended March 31,											Nine Months Ended March 31,
	2005			2004		$ Change			% Change			2005			2004		$ Change			% Change
Revenues	$	18,980		$	31,932	$	(12,952	)		(41	%)	$	108,521		$	89,331	$	19,190			21	%
Gross profit (loss)		(1,870	)		2,600		(4,470	)		(172	%)		(608	)		8,280		(8,888	)		(107	%)
As a percentage of revenues		(10%	)		8%								(1%	)		9%
Selling, general and administrative		2,712			2,910		(198	)		(7	%)		8,769			10,741		(1,972	)		(18	%)
Research and development		621			394		227			58	%		1,923			2,435		(512	)		(21	%)
Other income (expense)		(465	)		2,281		(2,746	)		(120	%)		(726	)		2,750		(3,476	)		(126	%)

and Daewoo Electronics Corp. (together, “Daewoo”) for breach of contract, breach of duty of good faith and fair dealing, breach of express and implied warranties, negligence, fraud, tortious interference, unjust enrichment, and alter ego liability, arising out of a series of purchase order contracts and related agreements. In the GoVideo New Jersey Action, GoVideo seeks compensatory damages from Daewoo in an amount not less than $19,400,000, plus punitive damages and certain other sums, and other relief. On December 13, 2005, Daewoo obtained an automatic clerk’s extension of Daewoo’s time to file an Answer or otherwise respond to the Complaint, which extended such time to December 27, 2005. Subsequently, by consent order dated December 29, 2005, Opta consented to further extend such time to January 27, 2006. On January 26, 2006, Daewoo filed an Answer to Complaint, Separate Defenses, Counterclaims, and Jury Demand, and on January 27, 2006, Daewoo filed an Amended Answer to Complaint, Separate Defenses, Counterclaims, and Jury Demand, denying any and all liability alleged in the Complaint, and alleging counterclaims against GoVideo based on causes of action for account stated, breach of contract, unjust enrichment, and fraud. By the counterclaims, Daewoo seeks damages in the total amount of $30,200,000, plus punitive damages and certain other sums. On February 16, 2006, GoVideo timely filed an Answer and Affirmative Defenses to the Counterclaims denying any and all liability. On May 17, 2006, the parties filed their Joint Discovery Plan, in accordance with the New Jersey Local Court Rules. On May 22, 2006, the mandatory Initial Scheduling Conference with the Court was held, during which a pre-trial discovery schedule was ordered by the Court, but no trial date was fixed. On May 23, 2006, a mandatory Settlement Conference with the Court was held, during which the parties discussed with the Court various preliminary settlement issues.

~~Revenues~~U.S. Customs and Border Protection

InOn ~~the~~March 15, ~~consumer~~2006, ~~electronics~~U.S. ~~industry,~~Customs and Border Protection (“Customs”) ~~revenues~~issued ~~generated~~a ~~during~~penalty notice (the ~~first~~“Notice”) ~~calendar~~to ~~quarter~~GoVideo of ~~any~~$4,380,000. ~~year~~The ~~are~~Notice covered ~~typically~~seven ~~the~~shipments, occurring from October 2004 through April 2005, ~~weakest~~of DVD players with unauthorized trademarks. On May 15, ~~due~~2006, ~~largely~~Go toVideo timely ~~the~~filed ~~seasonally~~a ~~high~~Petition ~~purchases~~for ~~during~~Relief (the ~~fourth~~“Petition”) ~~calendar~~raising ~~quarter.~~legal and factual ~~However,~~grounds insupporting ~~addition~~a tomitigation or remission of the ~~typical~~Notice ~~decrease~~amount. Estimated cost of settling such Notice, ~~revenues~~based ~~were~~on ~~down~~previous ~~substantially~~settlements ~~during~~with ~~the~~Customs, in ~~three~~the ~~months~~amount ~~ended~~of ~~March 31~~$400,000 ~~2005~~has asbeen ~~compared~~charged to ~~revenues~~current ~~generated~~operations ~~during~~in the ~~three~~nine months ended March 31, ~~2004 as a result of:~~ 2006.

-We 14are -involved in various other legal proceedings. Our management believes that any liability to us that may arise as a result of these proceedings will not have a material adverse effect on our consolidated financial position, results of operations or cash flows. However, litigation is subject to inherent uncertainties. Were an unfavorable ruling to occur, there exists the possibility of a material adverse impact on our results of operations of the period in which the ruling occurs. Our estimate of the potential impact on our financial position or overall results of operations for new legal proceedings could change in the future.

•As ~~The~~of ~~continual~~March 31, 2006, ~~pricing~~the ~~pressures~~Company has ~~that~~accrued ~~are~~$7,800,000 ~~traditional~~included in Accounts payable and accrued expenses in connection with the ~~consumer~~relevant actions ~~electronics~~described ~~market;~~above

•Note ~~The~~13 ~~inability~~— toSegment ~~negotiate a competitive product purchase price from contract manufacturers;~~ and Geographic Information

•The ~~Customers~~Chief Operating ~~going~~Decision ~~straight~~Maker to(“CODM”), ~~contract~~as ~~manufacturers~~defined by SFAS 131, Disclosures about Segments of an Enterprise and Related Information (“SFAS 131”), is the Chief Executive Officer. The CODM allocates resources to ~~purchase~~and assesses the performance of each operating segment using information about its revenues, gross margin, operating expenses and debt and related interest expense. During the three and nine months ended March 31, 2006, as a result of Correlant’s dissolution, we operated in one segment which was the distribution of innovative, high performance consumer electronic products. Although we operated in one additional segment, defined as the development, manufacture and distribution of products used for broadband Internet access, including data-over-cable equipment and digital subscriber line (“DSL”) access and networking devices during the nine months ended March 31, 2005, the activity related to this segment was solely Correlant. Correlant’s operating results have been excluded from continuing operations and classified as a discontinued operation for all periods presented in accordance with the requirements of SFAS 144. Therefore, the statement of operations, excluding discontinued operations, for all periods presented is attributable to our consumer electronics segment.

The decrease discussed above was somewhat offset by GoVideo’s increased product offerings, primarily the MP3 Rave MP branded product (“MP3”) which was introduced during the first quarter of fiscal 2005. Net revenues attributable to the MP3 totaled $2,097,000 during the three months ended March 31, 2005 as compared to no net revenue during the three months ended March 31, 2004. 15

~~The increase in overall revenues for~~Geographic the nine months ended March 31, 2005 as compared to the nine months ended March 31, 2004, was primarily attributable to GoVideo’s increased product offerings most notably the DVD Recorder + VCR, which was introduced during the second quarter of fiscal 2004 and the MP3 product discussed above. Net revenues attributable to the new DVD Recorder + VCR totaled $27,643,000 during the nine months ended March 31, 2005 as compared to $11,900,000 for the nine months ended March 31, 2004. Net revenues attributable to the MP3 totaled $22,558,000 during the nine months ended March 31, 2005 as compared to no net revenue during the nine months ended March 31, 2004. Information

~~The~~During ~~increase~~the ~~in overall revenues for~~three ~~the~~and nine months ended March 31, ~~2005~~2006 asand ~~compared~~2005, towe ~~the~~recorded ~~nine~~net ~~months~~revenues (returns) ~~ended~~throughout ~~March~~the ~~31,~~U.S. ~~2004 discussed~~and ~~above,~~Asia ~~was~~as ~~somewhat~~determined ~~offset~~ by the ~~decrease~~final ~~in other existing product sales,~~destination ~~including~~of the ~~DVD recorder~~product. ~~Net~~The ~~revenues~~following ~~attributable~~table tosummarizes ~~the~~total ~~DVD~~net ~~recorder~~revenues ~~decreased~~(returns) ~~$10,771,000~~attributable to ~~$47,235,000~~significant ~~during~~countries ~~the~~(in ~~nine months ended March 31, 2005 from $58,006,000 during the nine months ended March 31, 2004.~~ thousands):

Nearly 100% of our revenues were generated from domestic sales during the three and nine months ended March 31, 2005 and 2004. We expect this trend to continue as long as GoVideo sales are our main source of revenues. Gross Profit (loss) including Cost of Revenues

	Three Months Ended March 31,					Nine Months ended March 31,
	2006			2005		2006		2005

Asia	$	89		$	283	$	1,020	$	519
U.S.	(189		)	18,697		6,992		108,002
	$	(100	)	$	18,980	$	8,012	$	108,521

~~The~~Presented ~~decrease~~below ~~in gross profit (loss)~~is ~~dollars~~information ~~and~~regarding ~~gross~~identifiable ~~profit~~assets ~~(loss)~~from ~~percentage~~continuing ~~for the three and nine months ended March 31~~operations, ~~2005~~classified asby ~~compared~~operations tolocated in the ~~three~~U.S. and ~~nine~~Asia ~~months~~(in ~~ended March 31, 2004 was due to the following~~thousands):

• The liquidation of GoVideo’s significantly overstocked and overpriced inventory of DVD recorders, DVD Recorders + VCRs and MP3 players. At certain times during both the three and the nine months ended March 31, 2005 GoVideo had committed outstanding orders as the prices of these products began to drop substantially. Although GoVideo was able to cancel and/or renegotiate some outstanding orders, it was not sufficient to mitigate the substantial price drop. As a result, GoVideo had to liquidate a substantial amount of inventory at negative gross profit.

	As of March 31,
	2006		2005
U.S.	$	6,035	$	43,082
Asia	587		453
	$	6,622	$	43,535

~~• $890,000 reserve for noncancellable purchase commitments during the nine months ended March 31, 2005;~~16

•Item ~~$1,082,000~~2 ~~and~~- Management’s ~~$1,696,000~~Discussion ~~net~~and ~~increase~~Analysis toof ~~the~~Financial ~~inventory~~Condition ~~valuation during the three~~ and ~~nine~~Results ~~months ended March 31,2005, respectively; and~~of Operations:

•You should read the following discussion in conjunction with Opta Corporation’s (“Opta” or “Company”) unaudited condensed consolidated financial statements and notes included herein. The ~~continual~~results ~~downward~~described ~~price~~below ~~pressure~~are ~~experienced~~not necessarily byindicative of the ~~overall~~results ~~consumer~~to ~~electronics~~be ~~market~~expected in any future period. Certain statements in this discussion and analysis, including statements regarding our strategy, financial performance and revenue sources, are forward-looking statements based on current expectations and entail various risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Readers are referred to Opta’s Annual Report on Form 10-K for the year ended June 30, 2005 as filed with the SEC on March 14, 2006 and to the section entitled “Certain Factors That May Affect Future Results” contained herein which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements.

We ~~anticipate~~begin ~~continued~~Management’s ~~pressure~~Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) with a discussion of transactions consummated during Fiscal 2006 that have had, and will continue to have, a significant impact on our consolidated financial position, results of operations and cash flows and how these transactions will impact our “Business Outlook” for the ~~selling~~remainder ~~prices~~of fiscal 2006. We then provide a more detailed analysis of ~~GoVideo’s~~our ~~different~~financial ~~consumer~~condition ~~electronics~~and ~~products~~results of operations for the ~~foreseeable~~three ~~future~~and nine months ended March 31, 2006 compared to the three and nine months ended March 31, 2005. This detailed analysis is provided solely for readers to understand the historical results of our operations during the time periods covered. However, due to the strategic change in direction of Opta and the significant transactions we entered during fiscal 2006, these results are not indicative of future results.

~~Operating~~Next ~~Expenses~~we analyze the changes in our cash flows, and discuss our financial commitments in the section entitled “Liquidity and Capital Resources.” We conclude MD&A with (I) a discussion of the Critical Accounting Policies we believe are important to understanding the assumptions and judgments incorporated in our reported financial results, and (II) Recently Issued Accounting Standards and the impact they had or will have on our results of consolidated financial position, results of operations and cash flows.

~~Selling,~~The ~~general~~various ~~and~~sections ~~administrative (SG&A).~~of SGthis MD&A ~~expense~~contain ~~consists~~a number ~~primarily~~ of ~~personnel~~forward-looking ~~costs for our sales~~statements, ~~administrative~~ ~~and~~all ~~support~~of ~~staff,~~which ~~allowance~~are ~~for~~based ~~doubtful~~on ~~accounts,~~our ~~legal and accounting~~current ~~fees~~expectations and ~~advertising~~could ~~and~~be ~~product~~affected ~~promotional~~by ~~expenses. The decrease in SG&A expenses for~~ the ~~three~~uncertainties and ~~nine~~risk ~~months ended March 31, 2005 as compared to the three and nine~~factors ~~months~~described ~~ended~~throughout ~~March~~this ~~31, 2004 was due to the following:~~ filing.

•Fiscal The2006 shutBusiness down of Correlant’s historical operations which contributed $69,000 and $436,000 to SG&A during the three and nine months ended March 31, 2005, respectively as compared to $622,000 and $3,015,000 during the three and nine months ended March 31, 2004, respectively.Developments

•Going Private ~~The one time recovery of bad debt associated with settling a legal dispute, during the nine months ended March 31, 2005, with one of Correlant’s previous customers. The recovery totaled $1,946,000.~~Transaction

We are currently taking steps (“Going Private Transaction”) to complete a corporate reorganization that will enable us to become a non-reporting company with the Securities and Exchange Commission (the “Commission”). If consummated, the Going Private Transaction will enable us to terminate our Periodic Reporting Obligations so that we may continue future operations as a private company, relieving us of the costs, administrative burdens and competitive disadvantages associated with operating as a public company. Following the adoption of Sarbanes-Oxley, the amount of management time and Company resources required to comply with such requirements have become overly burdensome for a company of our size. On June 17 and August 2, 2005, our Board of Directors adopted resolutions proposing and approving the Going Private Transaction. On April 8, 2006, our Board of Directors adopted resolutions approving the entire Going Private Transaction and revoked the June 17 and August 2, 2005 Board consents. On July 18, 2005 and August 2, 2005, stockholders who collectively own approximately 60.2% of our outstanding capital stock, consented in writing to the Going Private Transaction. On April 8, 2006, stockholders who collectively own approximately 51.2% of our outstanding capital stock consented in writing to the Going Private Transaction and revoked the July 18 and August 2, 2005 stockholder consents. The ~~above~~vote ~~decrease~~of more than 50% of our outstanding stock was ~~slightly~~required to approve such transaction. The prior Board and stockholder ~~offset~~consents were revoked by both the ~~following:~~Board of Directors and the stockholders, and the entire Going Private Transaction was approved, on April 8, 2006 as a result of entering into several material transactions subsequent to the first and second approvals.

•On ~~Increased~~July 8, ~~sales~~2005 we filed a preliminary Schedule 14C and ~~marketing~~a ~~efforts~~Schedule ~~expended~~13E-3 describing the planned Going Private Transaction. Both documents were amended to ~~launch~~incorporate ~~the~~significant ~~new~~company events ~~MP3~~and ~~brand~~filed August 3, ~~Rave~~2005. ~~MP3,~~The ~~during~~Staff of the ~~three~~Commission reviewed our Schedules 14C and ~~nine~~13E-3 ~~months~~and ~~ended~~responded ~~March~~with 31inquiries and requests for additional information. We answered all of the Staff’s inquiries and requests for additional information in a letter dated October 3, 2005; and amended our Schedule 14C and Schedule 13E-3 on October 3, 2005. We subsequently received a further letter from the Staff dated October 18, 2005. We answered the Staff’s second round of inquiries and requests for additional information in a letter

~~• Increased sales and marketing dollars offered to customers as an incentive to purchase GoVideo brand products as opposed to competitor’s product that already exists in the market;~~17

•dated ~~Increased~~May 4, ~~headcount~~2006 toand ~~support~~amended ~~GoVideo’s~~our ~~growing~~Schedule 14C ~~business~~and ~~needs~~Schedule as13E-3 on May 4, 2006. Because the Staff has not yet approved our amended 14C and Schedule 13E-3 filed on May 4, 2006, we have not yet filed our definitive Schedule 14C for the Going Private Transaction and consequently have not filed our Form 15 — Certification and Notice of Termination of Registration. As a result, ofwe are required to continue our periodic reporting under the ~~increased~~Securities ~~revenues;~~Exchange ~~and~~Act of 1934.

•In ~~$611,000~~addition ~~increase in GoVideo’s bad debt related~~ to ~~past~~the ~~due~~Going ~~customers~~Private ~~during~~Transaction, ~~the~~we ~~nine~~consummated ~~months~~several transactions, ~~ended~~as ~~March~~described 31below, ~~2005~~during asfiscal ~~compared~~2006 tothat ~~March~~significantly impacted ~~31,~~our ~~2004~~consolidated operations.

~~Excluding~~Correlant Communications, Inc. (“Correlant”). As previously reported, on July 18, 2005, the ~~impact~~Board of ~~the~~Directors ~~one~~of ~~time~~Correlant ~~recovery~~approved ofthe ~~bad~~dissolution ~~debt~~of Correlant, wepending ~~believe~~approval ~~SG&A~~by ~~expenditures~~the ~~may~~Correlant shareholders. ~~decrease~~At asa ~~GoVideo~~Special ~~has~~Meeting ~~taken~~of Shareholders held August 5, 2005, ~~steps~~Correlant toshareholders ~~reorganize~~approved ~~certain~~the ~~aspects~~dissolution of ~~its business~~Correlant. ~~GoVideo~~At ~~has~~the ~~undertaken~~time ~~cost reduction~~of ~~efforts~~the dissolution, ~~including~~Opta ~~reducing~~held ~~staff~~10,000 ~~realigning~~shares ~~the~~of ~~roles~~Series D Preferred Stock of Correlant and ~~responsibilities~~approximately 13,900,000 shares of ~~management~~common stock of Correlant. To ~~and~~date, ~~reducing~~Opta ~~other~~has ~~operating~~received ~~expenses~~liquidation proceeds inof an$10,000,000 ~~attempt~~for toits ~~return~~Series D topreferred ~~profitability~~stock and ~~become~~$1,276,000 ~~cash~~for ~~flow~~its ~~positive~~common stock. Opta used part of the proceeds to purchase GoVideo’s loan from Wells as described below.

~~Research~~The ~~and~~dissolution ~~development~~of ~~(R&D). R&D~~Correlant ~~expenses~~was ~~consist~~independent ~~primarily~~ of ~~personnel~~the sale ~~costs~~ of ~~employees~~GoVideo’s ~~engaged~~intellectual ~~in research~~property, ~~design~~ ~~and~~restructuring ~~development~~GoVideo’s ~~activities~~line ~~and,~~of ~~to a lesser extent, design prototype material~~credit ~~expenditures~~ and ~~equipment~~restructuring and supplies required to develop new products and enhance existing products. The increase in R&D expense during the three months ended March 31, 2005 as compared to the three months ended March 31, 2004 was attributable to the increased personnel costs to support GoVideo’s ~~expanded~~operations ~~product~~(each ~~offerings.~~of ~~The decrease~~which intransactions ~~R&D expenses for the nine months ended March 31, 2005 as compared to the~~are ~~nine~~described ~~months~~below). ~~ended~~TCL ~~March~~Industries ~~31, 2004~~ was ~~directly~~never ~~related~~a toshareholder ~~the shut down~~ of Correlant~~’s historical~~ ~~operations.~~and ~~Correlant incurred no R&D expenses during the nine months ended~~as ~~March 31~~such, ~~2005 as compared to $1,603,000 during the nine months ended March 31, 2004. This decrease~~ was ~~somewhat~~not ~~offset~~a byparty ~~the increased R&D expense attributable~~ to ~~GoVideo~~ Correlant’s ~~expanded product offerings as previously discussed.~~ dissolution

-Opta 15Systems, -LLC d/b/a GoVideo (“Opta Systems” or “GoVideo”). As previously reported, on July 26, 2005, Opta entered into a series of transactions to address the continued losses and liquidity issues with GoVideo. Each of such transactions was conditioned upon each other and the consummation of such transactions was deemed to occur simultaneously.

WeOn ~~continue~~July 26, 2005 pursuant to ~~invest~~a Participation Agreement (the “Participation Agreement”) between us and Wells Fargo Business Credit, a division of Wells Fargo Bank, NA (“Wells”), we acquired an 80% participation interest in the ~~future~~credit facility of our bywholly-owned ~~funding~~subsidiary, ~~product~~GoVideo, ~~development~~under the Credit and ~~enhancement.~~Security ~~However~~Agreement dated as of July 21, ~~research~~2003, as amended to date (the “Wells Credit Agreement”) between GoVideo and ~~development~~Wells. On October 13, 2005, we amended the ~~expenditures~~Participation ~~may~~Agreement ~~decrease~~to provide for revolving advances in an amount up to $2,000,000 over the borrowing base (such revolving advances over the borrowing base to be referred to as “Overline Advances”) and as a result, our participation percentage was 80% with respect to the revolving advances that were not Overline Advances and 100% with respect to Overline Advances. The maximum amount of the line of credit remained at $4,000,000. Concurrently with the purchase of the participation and our collateral deposit of 20% of the loan value in cash collateral to secure our obligations and guaranty of the Wells Credit Agreement, Wells released its lien on the intellectual property assets of GoVideo’s ~~reorganization~~under ~~efforts~~the ~~discussed~~Wells Credit ~~above~~Agreement.

~~Other~~Pursuant ~~Income~~to a forbearance agreement dated July 22, 2005, most recently amended by Wells January 20, 2006, between GoVideo and Wells (~~Expense~~the “Forbearance Agreement”), Wells agreed to forbear from exercising its rights and remedies with respect to existing defaults under the Wells Credit Agreement from the date of the agreement through January 27, 2006 and modify certain terms of the Credit Agreement, including reducing the maximum line of credit to $4,000,000 and waiving the termination fee. Wells also agreed that defaults by GoVideo under financial covenants in the Wells Credit Agreement and with respect to material adverse changes will not constitute new defaults under that agreement. As a condition to the forbearance by Wells, GoVideo agreed to pay to Wells a fee of $300,000 by adding the fee to the loan’s principal balance in two installments, $150,000 on September 2, 2005 and $150,000 on January 4, 2006. Opta agreed to enter into the Participation Agreement and to deposit 20% of the loan value in cash collateral to secure Opta’s guaranty as described above.

~~Other~~On ~~income (expense) consists of interest income~~January 27, ~~interest expense~~2006, ~~foreign~~pursuant ~~exchange~~to ~~gain~~a ~~(loss) and other non-operating~~Loan ~~items.~~Sale WeAgreement ~~experienced~~dated ~~net~~January 20, ~~other~~2006 ~~expense~~between ~~during~~Opta ~~the three~~ and ~~nine months ended March 31~~Wells, ~~2005~~ ~~as a result of interest expense related to GoVideo’s debt. GoVideo’s~~the ~~interest~~Participation ~~expense~~Agreement ~~increased~~was ~~during~~terminated ~~the three~~ and ~~nine~~Opta ~~months~~purchased ~~ended~~the ~~March~~entire 31right, ~~2005 as~~ ~~compared~~title ~~to the three~~ and ~~nine~~interest ~~months~~of ~~ended~~Wells ~~March 31~~under, ~~2004~~and asOpta abecame ~~result~~the ofLender ~~GoVideo’s increased average debt principal. Additionally~~under, ~~interest~~the ~~expense was incurred at a higher~~Wells ~~default~~Credit ~~interest rate attributable to GoVideo’s non-compliance with certain debt covenants~~Agreement. The ~~interest~~purchase ~~expense~~price was ~~somewhat~~$2,148,000, ~~offset~~which byconsisted ~~settling~~of ~~a legal dispute with one~~the offollowing: ~~Correlant’s~~$2,113,000 ~~previous customers as discussed above~~principal, ~~resulting in a one time gain of~~ $~~774~~23,000. ~~Additionally,~~interest ~~Opta~~and ~~settled~~unused aline ~~dispute with this same Correlant customer, a stockholder~~ of ~~Opta~~credit fees, ~~which~~and ~~resulted in a one time gain of~~ $8812,000. ~~Both~~legal ~~gains~~and ~~were realized~~audit ~~during~~fees ~~the~~incurred ~~three~~by ~~months ended September 30, 2004~~Wells. ~~Interest~~The ~~income~~full ~~remained~~amount ~~fairly~~of ~~constant~~Opta’s ~~during~~participation ~~all~~interest ~~periods~~was ~~presented~~credited asagainst asuch ~~result~~purchase ofprice. ~~the~~The ~~slightly~~loan, ~~decreased~~principal, ~~cash~~interest and ~~cash~~related ~~equivalents~~fees, ~~and~~between ~~short~~Opta ~~term~~and ~~investment~~GoVideo ~~balances~~has ~~offset~~been byeliminated ~~the~~from ~~slight~~our ~~increase~~consolidated ~~in fixed income interest rates.~~

~~Liquidity and Capital Resources~~ 18

~~The~~financial ~~Company~~statements ~~incurred~~as ~~a net loss~~ of ~~$12,632,000~~ ~~during~~and for the ~~nine~~period ~~months~~ ended March 31, ~~2005~~2006. AtOn February 1, ~~March~~2006, 31Opta, ~~2005~~as such Lender, ~~the~~and ~~Company had~~GoVideo anfurther ~~accumulated~~amended ~~deficit~~the Forbearance ofAgreement ~~$118,243,000~~to ~~and~~extend the ~~Company’s~~Forbearance ~~sole~~Period ~~operating subsidiary,~~to ~~GoVideo~~April 30, ~~was~~2006, and ~~still~~to ~~is,~~terminate inthe ~~default~~guaranty ~~under~~and ~~certain~~the ~~debt~~subordination ~~covenant~~agreement ~~provisions~~previously ofdelivered ~~its~~by ~~line~~Opta ofto ~~credit.~~Wells ~~GoVideo is currently~~ under athe ~~forbearance~~Credit ~~agreement~~Agreement. ~~with~~On ~~its~~April 30, ~~lender~~2006, ~~which~~Opta ~~commenced~~further ~~March~~extended 1,the ~~2005~~Forbearance ~~and~~Period ~~is due~~ to ~~expire on August~~ October 31, ~~2005~~2006.

~~Additionally,~~Pursuant into ~~June~~a ~~2003~~purchase ~~GoVideo borrowed~~and ~~substantial~~sale ~~funds~~agreement ~~from TCL Industries~~dated July 26, 2005 (the ~~majority~~“TCLMM ~~stockholder~~Agreement”) ofamong ~~Opta~~GoVideo, ~~and~~TCL ~~Asia~~Multimedia ~~Focus~~Technology ~~Industrial~~Holdings ~~Ltd.~~Limited, ana ~~entity~~Cayman ~~affiliated~~Islands company with ~~TCL~~shares ~~Industries.~~listed ~~The~~on ~~purpose of~~ the ~~loans~~ ~~was~~Stock toExchange ~~fund~~of ~~inventory~~Hong ~~purchases~~Kong ~~and~~Limited ~~operating~~(“TCLMM”), ~~expenses~~TCL Industries (H.K.) ~~Both~~Holdings ~~loans~~Limited (“TCL”), ~~which~~Asia ~~are~~Focus ~~subordinate to~~Industrial ~~GoVideo’s~~Limited ~~line~~(“Asia Focus”) ofand ~~credit~~Opta, ~~became~~TCLMM ~~due~~agreed ~~during~~to ~~fiscal~~assume ~~year~~the ~~2004.~~debt ~~GoVideo~~obligations ~~was~~owed ~~unable~~by GoVideo to ~~pay~~TCL ~~off the loans~~ and ~~extended~~Asia ~~the~~Focus ~~due~~under ~~date~~ three ~~times.~~promissory ~~The~~notes, ~~current~~with ~~due~~obligations ~~date for the~~totaling ~~loan~~approximately ~~with~~$11,000,000 ~~TCL~~at ~~Industries is~~ July 24 26, 2005. ~~The~~(“Existing ~~current~~Obligations”). ~~due date for the loan with Asia~~The ~~Focus~~Existing ~~Industrial~~Obligations ~~Ltd.~~were ispreviously ~~August~~guaranteed 11by Opta, ~~2005.~~and ~~Both~~secured ~~loans~~by ~~are~~Opta’s pledge ~~collateralized~~of by 100% of the Common Stock and ~~Preferred~~ Series D ~~stock~~Preferred ofStock of Correlant, ~~Communications~~held ~~owned~~ by Opta. ~~There~~Pursuant ~~can be~~to nothe ~~assurance~~TCLMM ~~that~~Agreement, ~~GoVideo~~TCL ~~will~~and beAsia ~~able~~Focus released toOpta’s ~~pay~~obligations ~~the~~as ~~loans~~guarantor ~~when~~under ~~they~~the ~~mature~~Existing orObligations ~~that~~and ~~another~~released ~~extension~~Opta’s ~~can~~pledge beof ~~successfully~~the ~~negotiated~~Correlant shares. TCLMM and Asia Focus are affiliates of TCL, the majority stockholder of the Company.

~~During~~In ~~fiscal~~consideration ~~2004~~for TCLMM’s assumption of the Existing Obligations, ~~Opta~~GoVideo ~~entered~~(i) assigned ~~into~~to aTCLMM ~~financing~~all ~~agreement~~of ~~with~~GoVideo’s ~~TCL~~right, ~~Industries.~~title ~~Opta~~and ~~ultimately~~interest ~~loaned~~in ~~the~~and ~~funds~~ to ~~GoVideo~~certain tosignificant ~~fund~~intellectual ~~inventory~~property ~~purchases~~assets of GoVideo (the “GoVideo IP”) and ~~operating~~(ii) issued a ~~expenses.~~promissory ~~The~~note ~~financing~~in ~~agreement~~favor ~~has~~of ~~been~~TCLMM ~~extended~~(the “TCLMM Note”) for an initial principal ~~three~~amount ~~times~~of ~~with~~$1,000,000, arepresenting ~~new~~the ~~maturity~~preliminary ~~date~~difference between the value of ~~July~~the 21GoVideo IP, ~~2005.~~as ~~The~~determined ~~loan~~by isa ~~collateralized~~third-party appraiser, and the Existing Obligations assumed by ~~100%~~TCLMM. A subsequent independent appraisal of the ~~Common~~GoVideo ~~and~~IP ~~Preferred~~was ~~Series~~completed, Dwhich ~~stock~~reduced the final valuation of ~~Correlant~~the ~~Communications~~GoVideo ~~owned~~IP by ~~Opta~~$700,000. As a result, the TCLMM Note automatically increased to $1,700,000.

The ~~above~~TCLMM ~~matters~~Note ~~raise~~principal ~~substantial doubt~~and ~~about~~interest, ~~the~~at ~~Company’s ability to continue as~~ a ~~going concern. Although Opta~~monthly ~~expects~~rate ~~to incur additional losses during the remainder~~ of ~~fiscal 2005~~0.257%, ~~the~~was ~~Company believes~~originally ~~that~~due itand ~~will~~payable ~~have~~on ~~sufficient~~January 26, ~~resources to continue normal operations~~2006. Pursuant ~~The Company has taken steps~~ to ~~reorganize~~the ~~certain~~TCLMM ~~aspects~~Agreement, ~~of its business.~~ GoVideo ~~replaced its Chief~~ ~~Executive~~granted ~~Officer~~to ~~with~~TCLMM ~~the~~a ~~Chief~~subordinated ~~Operating~~lien ~~Officer of Opta~~ on anall ~~interim basis to further evaluate the ongoing operations~~ of GoVideo.’s ~~Additionally~~assets, ~~GoVideo~~as ~~has~~security for ~~undertaken~~the ~~cost reduction~~TCLMM ~~efforts~~Note, ~~including~~junior ~~reducing~~to ~~staff,~~the ~~realigning~~lien under the ~~roles~~Wells ~~and~~Credit ~~responsibilities~~Agreement. ofIn ~~management~~addition, ~~and~~Opta ~~reducing~~agreed ~~other~~to ~~operating~~guaranty ~~expenses~~GoVideo’s inobligations anunder ~~attempt~~the toTCLMM ~~return to profitability.~~Note Ifpursuant ~~the Company is unable~~ to ~~return to profitability as~~ a ~~result~~Guaranty ofdated ~~this realignment~~July 26, ~~additional~~ ~~steps~~2005. ~~including,~~GoVideo ~~but~~paid ~~not~~the ~~limited~~principal toand interest, ~~further~~approximately ~~cost~~$1,726,000, ~~reductions~~on ~~and~~the ~~eliminating some~~TCLMM ofNote ~~its~~in ~~current~~full ~~activities,~~on ~~may be necessary~~February 14, 2006.

Under the TCLMM Agreement, TCLMM granted to GoVideo a 90-day, 16non-exclusive, worldwide license to use the GoVideo IP on a royalty-free basis. On August 30, 2005, GoVideo and TCLMM entered into an exclusive license agreement (“TCLMM License Agreement”) through October 24, 2008, with an automatic renewal for subsequent two year terms unless terminated by either party by ninety days written notice of intention not to renew. Under the terms of the agreement, GoVideo agreed to pay TCLMM a royalty based on the cost of goods sold in connection with the distribution, sale, advertising and promotion of certain consumer electronics products under the GoVideo tradename. The TCLMM License Agreement was subsequently terminated as discussed below.

In addition to restructuring GoVideo’s debt, during the first quarter of fiscal 2006, GoVideo began shutting down its historical operations as an original equipment manufacturer (“OEM”) because the business model required significant working capital to meet inventory needs and also carried a substantial risk of obsolete inventory. The ~~following~~shut ~~table~~down ~~summarizes~~of ~~our~~GoVideo’s historical ~~cash~~operations ~~flows~~as a consumer electronics OEM was substantially completed by January 31, 2006. In anticipation of implementing a new business model as a brand licensing provider for domestic retail consumer electronics, GoVideo entered the ~~nine~~TCLMM ~~months~~License ~~ended~~Agreement ~~March~~as discussed 31above. However, on December 28, 2005, ~~compared~~TCLMM notified GoVideo of its intention to exercise its right to unilaterally terminate the ~~nine~~agreement without ~~months~~cause ~~ended~~upon ninety days’ written notice pursuant to the terms of the ~~March~~agreement. 31GoVideo agreed to terminate the agreement effective as of January 12, 2006 ~~2004~~in (order for Opta to continue the brand licensing business under a new license agreement with TCLMM, as described below. Subsequent to the shut down of GoVideo’s historical operations and the termination of the TCLMM License Agreement, GoVideo’s short term business plan has focused on collecting receivables and managing liabilities that remain outstanding from GoVideo’s historical operations. Currently, GoVideo has no business plan that generates revenue. If GoVideo does not identify and successfully implement a longer term business plan that generates revenue, GoVideo will be shut down. If GoVideo is shutdown and has any assets subsequent to the shutdown, the assets will be combined with the proceeds from the liquidation of Correlant and used to identify market opportunities that will complement the Company’s business and long-term strategies while leveraging the Company’s significant experience in the ~~thousands):~~consumer electronics market.

	March 31, 2005			March 31, 2004
Net cash provided (used) by operating activities	$	610		$	(24,447	)
Net cash provided (used) by investing activities		177			2,629
Net cash provided (used) by financing activities		(1,877	)		16,180

~~As of March 31~~On January 12, ~~2005~~2006, ~~our~~Opta ~~principal source of liquidity included cash~~ and ~~cash~~TCLMM ~~equivalents~~entered ~~and~~into ~~short-term~~an ~~investments~~exclusive oflicense ~~$18~~agreement,~~992,000.~~ ~~The~~which ~~net~~includes ~~cash~~the ~~provided~~right byto ~~operating~~sublicense, ~~activities~~through ~~during~~August 3, ~~the nine months ended~~2008, ~~March~~with ~~31,~~an ~~2005~~automatic ~~was~~renewal ~~primarily~~for ~~due~~subsequent totwo ~~the~~year ~~collection~~terms ofunless ~~customer~~terminated ~~accounts receivables and~~by ~~increased~~either ~~accounts~~party ~~payable~~by asone ahundred ~~result~~eighty ofdays ~~managing~~written ~~GoVideo’s~~notice ~~liquidity,~~of ~~offset~~intention bynot ~~the~~to ~~consolidated operating loss~~renew. WeUnder ~~expect~~the ~~future~~terms ~~cash~~of ~~provided~~the ~~(used)~~agreement, byOpta ~~operating~~will ~~activities to~~pay ~~fluctuate,~~TCLMM ~~primarily~~a asroyalty abased ~~result~~on the cost of ~~fluctuations~~goods sold in ~~our~~connection ~~operating~~with ~~results~~the distribution, ~~the~~sale, ~~timing~~advertising ofand ~~product~~promotion ~~shipments,~~of ~~accounts~~certain ~~receivable~~consumer ~~collections,~~electronics ~~inventory~~products ~~management~~under ~~and~~trademarks associated with the ~~timing of~~GoVideo ~~vendor payments~~tradename.

~~For~~Opta entered the ~~nine~~agreement ~~months~~as ~~ended~~part ~~March~~of ~~31,~~the Company’s consolidated strategic shift ~~2005~~toward becoming a brand licensing provider for domestic retail consumer electronics. The GoVideo name has been positioned in the consumer electronics industry to connote high performance products that incorporate advanced technology, ~~our~~ease ~~principal~~of ~~investing~~use, ~~activities~~and ~~included~~superior industrial design since 1984. As such, Opta management intends to capitalize on the ~~net~~brand ~~sales~~name recognition and sublicense the GoVideo brand name by bridging international manufacturers of consumer ~~short-term~~electronics ~~investments~~to domestic retailers. Opta will sublicense the GoVideo tradename to third party licensees who produce, market and sell their consumer electronics products bearing the ~~net~~GoVideo ~~purchase~~tradename. Opta plans to choose its licensees carefully and impose upon such licensees various restrictions on the products, and on the manner, on which the GoVideo name may be used. In addition, the Company will require its licensees to abide by certain standards of ~~property~~conduct and ~~equipment~~the laws and regulations of the jurisdictions in which they do business. However, if a licensee fails to adhere to these requirements, the GoVideo brand could be damaged. The GoVideo brand could also be damaged if a licensee becomes insolvent or by any negative publicity concerning a licensee or if the licensee does not maintain good relationships with its customers or consumers.

~~Financing~~As of ~~activities for~~ the ~~nine months~~date ~~ended~~of ~~March~~this 31report, ~~2005~~Opta ~~consisted~~has ~~almost~~two ~~entirely~~license ofagreements ~~our~~with ~~subsidiary~~international consumer ~~GoVideo~~electronics ~~receiving advances~~manufacturers, ~~and~~pertaining ~~making~~to ~~payments~~the onGoVideo ~~its~~brand, ~~available~~that ~~line~~cover domestic ~~of credit~~markets. ~~The~~Opta ~~net~~is ~~decrease~~actively ~~to GoVideo’s~~pursuing ~~line~~new oflicensees ~~credit~~for ~~was~~both adomestic ~~result of paying down the principal as GoVideo~~and ~~received~~international ~~payments from customers~~markets.

~~Cash~~The ~~and~~above ~~Working~~transactions ~~Capital~~impact our consolidated ~~Requirements~~liquidity as follows:

At· Decreased ~~March 31~~cash, ~~2005,~~cash weequivalents ~~had working~~and ~~capital~~short ofterm ~~$10,333,000~~securities ~~compared~~by toapproximately $256,~~045~~600,000 ~~at June 30~~, ~~2004.~~which ~~The majority of the decrease in working capital~~ was ~~attributable~~paid to ~~(a) the decrease in GoVideo~~Correlant’s ~~accounts~~non-controlling ~~receivable~~shareholders, ~~due~~mostly tooutside ~~lower~~investors ~~revenues~~unaffiliated ~~during~~with ~~the~~Opta or ~~quarter~~TCL ~~ended~~and ~~March 31~~cofounders, ~~2005, (b) the increase in GoVideo’s accounts payable~~ as a result of ~~managing~~liquidating ~~GoVideo’s liquidity issues, and (c) to our consolidated net loss.~~ Correlant;

In· Decreased ~~July 2003~~debt, ~~GoVideo~~including ~~entered into~~both ~~a financing agreement last amended~~ principal and ~~restated~~accrued ininterest, ~~May 2004. The original maximum line~~ of ~~credit~~approximately ~~available was~~ $409,~~000~~300,000 ~~limited~~as by a ~~borrowing~~result ~~base determined by specific inventory and receivable balances, and provides for cash loans, letters~~ of ~~credit and~~assigning ~~acceptances. The financing agreement, as amended, states that~~ the ~~line of credit will~~ ~~mature~~GoVideo ~~July 21,~~IP ~~2007.~~to ~~Interest~~TCLMM ~~was~~in ~~originally~~exchange ~~charged~~for atassuming ~~prime plus 1/2 percent. The line of credit is collateralized by all of~~ GoVideo’s ~~assets~~debt; and up to $5,000,000 of the credit facility is guaranteed by Opta. Under the current credit facility, GoVideo is required to comply with certain financial covenants and conditions including minimum levels of net income. GoVideo was unable to comply with the financial covenants by not earning the required minimum net income. As a result, on June 1, 2004, interest began accruing at the default rate of prime plus 3 1/2%.

On· Purchase ~~November 1, 2004,~~ of GoVideo’s ~~entered a forbearance agreement (“Agreement”) with its~~ line of credit ~~lender.~~by ~~See Agreement~~Opta ~~details~~(as discussed atabove) ~~Note~~from ~~20 of our Annual Report on Form 10-K filed with the SEC on February 18~~Wells, ~~2005. GoVideo was unable to cure the existing defaults under the terms of the original Agreement,~~ which ~~expired February 28, 2005, and was forced to extend the~~used ~~forbearance~~cash ~~agreement~~totaling ~~(“Amended Agreement”) until August 31~~$2, ~~2005. In the Amended Agreement~~148, ~~GoVideo agreed to the following significant conditions:~~ 000.

•We Tobelieve ~~pay~~the ~~all~~above transactions ~~the~~will ~~lender's~~impact ~~costs~~our ~~and~~future ~~expenses~~consolidated ~~associated~~results ~~with~~of ~~existing~~operations ~~default;~~as follows:

•· Decrease ~~To pay $100~~revenues,~~000,~~ incost ~~installments,~~of ~~for~~revenue ~~forbearance~~ and operating ~~other~~expenses ~~accommodations~~as ~~provided~~a byresult of focusing the ~~lender~~majority ~~under~~of our business toward the ~~Amended~~new ~~Agreement~~brand licensing business model;

•· Decrease Tointerest ~~pay~~income noas ~~more~~a ~~than~~result ~~$100,000~~of liquidating ~~toward any subordinate indebtedness~~Correlant; and ~~o To not incur capital expenditures in excess of $150,000.~~

~~The~~· Decrease ~~Agreement~~interest ~~also~~expense ~~called~~due ~~for~~to the ~~following~~extinguishment ~~modifications:~~ of GoVideo’s debt to third parties.

•Looking Aforward ~~reduction~~to the remainder of ~~the~~fiscal ~~maximum~~2006 ~~line~~and beyond, in addition to ~~$20~~the continued evaluation of GoVideo,~~000~~ we will concentrate our efforts on the Going Private Transaction and terminate our Periodic Reporting Obligations,~~000;~~ relieving us of the costs, administrative burdens and competitive disadvantages associated with operating as a public company. Additionally, we will concentrate on our new business model as a brand licensing provider for domestic retail consumer electronics and, using the cash from the liquidation of Correlant, identifying market opportunities that will create and accelerate the growth and success of Opta complementary with the Company’s business and long-term strategies while leveraging our significant experience in the consumer electronics market.

•Results A change to the minimum net income (loss) per month requirement for the period of February 1, 2005 through August 31, 2005; andOperations

•The Afollowing ~~reduction~~table summarizes incertain ~~the~~aspects ~~borrowing~~of ~~base~~our asresults ~~determined~~of byoperations ~~specific~~for ~~inventory~~the three and ~~receivable~~nine months ~~balances.~~ended March 31, 2006 compared to the three months ended March 31, 2005 (in thousands):

~~- 17 -~~ 20

	Three Months Ended March 31,											Nine months Ended March 31,
	2006			2005			$ Change			% Change		2006			2005			$ Change			% Change

Net revenues (returns)	$	(100	)	$	18,980		$	(19,080	)	NM		$	8,012		$	108,521		$	(100,509	)	(93	%)

Cost of net revenues	34			20,850			(20,816		)	NM		11,388			109,129			(97,741		)	(90	%)
As a percentage of net revenues	NM			110		%						142		%	101		%

Selling, general and administrative	2,011			2,641			(630		)	(24	%)	8,470			10,278			(1,808		)	(18	%)
Research and development	—			621			(621		)	NM		197			1,923			(1,726		)	(90	%)
Restructuring charges	106			—			106			NM		1,119			—			1,119			NM

Other income (expense), net	65			(570		)	635			NM		6,420			(1,810		)	8,230			NM

Total gain (loss) from discontinued operations, net of taxes	—			25			(25		)	NM		(464		)	1,987			(2,451		)	NM

AsNM a= ~~result~~Not of GoVideo successfully extending its forbearance agreement through August 31, 2005, the current forecast shows the Company will have enough working capital to continue as a going concern for the 12 months following the date of this filing. However, GoVideo may need to extend its forbearance agreement beyond the current expiration date of August 31, 2005 if the Company does not successfully execute its current cost reduction efforts. If GoVideo requires an additional extension on its forbearance agreement, but is unable to obtain the extension, GoVideo will have to take steps towards liquidating significant assets in order to repay its lender. This will likely lead to significant losses on the liquidation of these assets. Additionally, should our capital requirements exceed cash available from operations we cannot assure that additional sources of financing would be available to us on commercially favorable terms, if at all. Meaningful

Contractual Obligations Overview

~~The~~During the ~~following~~three ~~table~~and ~~summarizes~~nine ~~our contractual~~months ~~obligations~~ended at March 31, ~~2005~~2006, ~~and~~GoVideo was in the ~~effect~~process of restructuring its business. It was moving away from its historical OEM business model in anticipation of a new business model as previously discussed. As a result, GoVideo’s focus was shutting down its historical operations such as ~~obligations~~selling ~~are~~existing ~~expected~~inventory toand collecting outstanding accounts receivable ~~have~~rather than focusing on ~~our~~business ~~liquidity~~strategies that had been previously utilized, e.g. introduction of new innovative products to the market and ~~cash~~increasing ~~flows~~the GoVideo brand recognition in ~~future~~both ~~periods~~the ~~(in~~U.S. ~~thousands):~~markets and abroad.

	Total		Less Than One Year		Greater Than One Year
Operating lease obligations	$	385	$	385	$ --
Capital lease obligations		--		--	--
Inventory purchase obligations		10,833		10,833	--
Total contractual cash obligations	$	11,218	$	11,218	$ --

Additionally, as a result of the approval of the dissolution of Correlant during the first quarter of fiscal 2006, the liquidation of Correlant and its related operating results have been excluded from the results from continuing operations and classified as a discontinued operation for all periods presented in accordance with the requirements of Statement of Financial Accounting Standards (“SFAS”) 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS 144”).

AllNet our operating lease obligations are building leases. Revenues

The ~~above~~significant ~~inventory purchase~~decrease ~~obligations~~in ~~are~~overall ~~entered~~revenues for the three and nine months ended March 31, 2006 as compared ~~part~~to the three and nine months ended March 31, 2005, is indicative of ~~the~~shutting ~~normal~~down ~~course~~GoVideo’s historical operations, as a consumer electronics OEM, in anticipation of implementing a new business bymodel. ~~our~~During ~~subsidiary~~the three months ended March 31, 2006, GoVideo had no product sales. Additionally, ~~and~~one ~~are~~of ~~generally~~GoVideo’s ~~subject~~customers returned products totaling approximately $189,000. Historically this customer has not returned product, although contractually could return product for up to ~~renegotiation~~one ~~and~~year ~~cancellation~~after the purchase date. Therefore, GoVideo did not record a sales returns allowance when the original sale, in August 2005, was recorded. During the nine months ended March 31, 2006, the majority of the revenues generated by GoVideo were a result of selling inventory on hand at June 30, ~~any~~2005. ~~time~~Additionally, the continual pricing pressures, traditional in the consumer electronics market, were prevalent during the nine months ended March 31, 2006.

~~Off-Balance~~The ~~Sheet~~decrease in GoVideo’s revenues was ~~Arrangements~~slightly offset by the increase in revenues generated from our subsidiary Go Video DigiTech (Huizhou) Co., Ltd. (“DigiTech”). Although DigiTech began operations in July 2004 to market GoVideo’s MP3 players under the GoVideo brand name, it did not generate revenue until September 2004. DigiTech contributed net revenues of $89,000 and $283,000 during the three months ended March 31, 2006 and 2005, respectively. During the three months ended March 31, 2006, DigiTech experienced a significant slow down in both unit sales and average selling price as a result of market competition. During the nine months ended March 31, 2006 and 2005, DigiTech contributed net revenues of $1,020,000 and $519,000, respectively. The increase

At March 31, 2005, we did not have any relationship with unconsolidated entities or financial partnerships, which other companies have established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes as defined in Item 303(a)(4)(ii) of SEC Regulation S-K. Therefore, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships. 21

~~Significant~~in ~~Trends~~DigiTech revenues is attributable to the start up nature of Digitech’s operations during the nine months ended March 31, 2005 as compared to its well established operations during the nine months ended March 31, 2006.

Our international revenues increased from less than one percent during the three and nine months ended March 31, 2005 to 100% and 13% of our revenues during the three and nine months ended March 31, 2006, respectively. The increase ~~following~~in international revenues is a ~~description~~result of ~~the~~DigiTech’s increased revenue ~~most~~as ~~significant~~a ~~recent~~relative ~~trends~~percentage inof our ~~consumer~~total ~~electronic~~revenue. Until Opta’s new business ~~segment:~~model is successfully implemented, we expect revenue generated from international sales as a percentage of total revenue to increase.

~~Traditional~~Cost ~~consumer electronics continues to be exposed to downward price pressure. We have responded, and will continue to respond to this negative trend through the introduction~~ of ~~new~~Net value-added products and models in home entertainment including MP3 players, DVD-related products and LCD displays and by increasing the number of unit sales. The difficulty of this trend is managing through price decreases as we outsource all manufacturing. Revenues

~~Generally,~~The decrease in the cost of net revenues for the three weand ~~are~~nine ~~able~~months ended March 31, 2006 as compared to ~~obtain~~the ~~competitive~~three ~~pricing~~and innine months ~~all~~ended ~~product~~March 31, ~~categories~~2005 was due to the decreased revenues. ~~However,~~ Cost of net ~~managing~~revenues ~~the~~as ~~timing~~a percentage of ~~future~~net ~~price~~revenues ~~decreases~~significantly increased for the three and ~~obtaining~~nine ~~forward~~months ~~pricing~~ended March 31, 2006 as compared to ~~protect~~the ~~our~~three and nine ~~inventory~~months asended ~~well~~March 31, as2005 ~~our~~due ~~customer~~to GoVideo’s ~~inventory~~focus ~~has~~of ~~been~~liquidating ~~challenging~~existing inventory. This trend continued through the shutdown of GoVideo’s historical operations, which was substantially completed by January 31, 2006.

~~GoVideo~~DigiTech’s cost of net revenues totaled $171,000 asand ~~well~~$203,000 asduring the ~~consumer electronics~~three ~~industry~~months inended ~~general~~March 31, 2006 ~~has~~and ~~been~~2005, ~~subject~~respectively; toand ~~substantial~~$1,257,000 ~~price~~and ~~competition.~~$339,000 Induring the nine months ~~addition~~ended March 31, ~~consumer~~2006 ~~electronics~~and ~~companies~~2005, inrespectively. Cost ~~Asia,~~of ~~particularly~~net ~~those~~revenues ~~from~~as ~~Korea~~a ~~and~~percentage ~~China,~~of net ~~pose~~revenues awas ~~severe~~192% ~~threat~~and ~~through~~72% ~~price~~for ~~competition.~~the Wethree ~~anticipate~~months ~~this~~ended ~~trend~~March 31, to2006 ~~continue~~and 2005, respectively. ~~And~~ Cost of net revenues as a ~~result~~percentage of net revenues was 123% and 65% for the nine months ended March 31, 2006 and 2005, respectively. During the ~~Company~~nine ~~realigned~~months ~~management~~ended March 31, 2006, DigiTech’s ~~roles~~cost of ~~and~~net ~~responsibilities~~revenues toincludes ~~have~~a lower of cost or market inventory allowance (“LCM ~~better~~allowance”) ~~control~~of ~~and~~$355,000. ~~more~~The ~~closely~~increases ~~manage~~in ~~GoVideo’s~~the ~~products~~cost ~~which~~of ~~should~~net ~~allow~~revenues as a percentage of net revenues for ~~more~~both the three and nine months ended March 31, ~~efficient~~2006 ~~responses~~as compared to ~~market~~the ~~opportunities~~three and ~~threats.~~nine months ended March 31, 2005 and the LCM allowance recorded during the three and nine months ended March 31, 2006 are both indicative of the extreme price competition in the MP3 market experienced by DigiTech.

~~- 18 -~~ Operating Expenses

~~DVD~~Selling, ~~players~~general and ~~recorders~~administrative (“SG&A”). ~~As a~~SG&A ~~result~~expense ofconsists ~~the~~primarily ~~dramatic expansion~~ of personnel ~~the~~costs ~~DVD~~for ~~market~~our sales, ~~DVD~~administrative ~~players~~and ~~have~~support ~~become~~staff, ~~commodity~~allowance for ~~products~~doubtful ~~and~~accounts, ~~suffer~~legal ~~from~~and ~~significant~~accounting ~~price~~fees ~~competition. The~~and ~~DVD~~advertising ~~Recorder~~and +product promotional ~~VCR has~~expenses. The ~~been~~decrease ~~one~~in ofSG&A ~~our~~expenses ~~fastest~~for ~~growing~~both ~~product~~the ~~areas~~three ~~recently~~ and wenine ~~believe~~months weended ~~are~~March 31, 2006 ~~positioned~~as compared to ~~face~~ the ~~competition~~three ~~because~~and ofnine ~~our~~months ~~strategic~~ended ~~relationships with manufacturers~~March 31, ~~our~~2005 was ~~expected~~attributable ~~reduction~~to ofthe ~~manufacturing~~shut ~~costs~~down ~~and~~of ~~our~~GoVideo’s ~~efforts~~historical tooperations ~~introduce new innovative,~~and ~~high-end~~specifically ~~and~~the ~~value-added products.~~ following:

~~LCD~~· Decreased ~~displays.~~marketing The large-screen display market for LCD displays has been expanding in recent years. As the market has increased so has the number of companies that compete with our products. Each company is increasing investment and ~~expanding production. As the number of companies~~advertising entering this market increases, it is expected that the unit price will continue to decrease due to intensifying competition. As a result of this trend, we have taken a cautious approach to this market and have limited our activity to only a few models until such time as we believe the volatility in this market can be safely managed. efforts;

~~MP3~~· Decreased ~~Players. We~~sales ~~continue to~~commissions ~~capitalize~~as ona ~~the increased demand for digital consumer electronics by introducing our~~result ~~Rave~~of ~~MP3~~the ~~players~~decreased ~~both~~sales; ~~domestically~~ and ~~internationally.~~

We· Reduction ~~will continue to invest~~ in ~~product development and the manufacturing process as we believe these are both critical to facilitate innovation of new and improved products and technologies~~workforce. ~~We will also continue to improve our distribution network reach our targeted customers more efficiently.~~

~~Business~~The ~~Outlook~~above decrease was somewhat offset by the following:

~~Since we filed our Annual Report on~~· Increased ~~Form~~provision ~~10-K~~ for ~~the~~doubtful ~~year~~accounts ~~ended~~to ~~June 30~~$1,330,000 ~~2004~~during ~~with~~ the ~~SEC~~nine onmonths ~~February~~ended 18March 31, 2006 ~~2005,~~from ~~we have focused~~$678,000 ~~and~~during ~~will~~the ~~continue~~nine tomonths ~~focus~~ended onMarch 31, ~~current~~2005 ~~operations,~~as ~~namely~~a result of GoVideo,’s difficulty in ancollecting ~~attempt to~~receivables ~~become~~due ato ~~profitable~~the ~~company~~uncertainty ~~with~~of GoVideo’s ~~the~~product ~~ability~~direction toand ~~generate~~its afuture, ~~positive~~certain ~~cash~~product ~~flow~~quality ~~from~~problems ~~operations.~~and slow paying customers;

~~Our primary strategy for business~~· Estimated ~~operations~~contingent ~~has~~liability ~~been~~associated towith ~~restructure~~a ~~our~~penalty ~~unprofitable~~notice ~~businesses,~~received ~~acquire~~from ~~undervalued companies (such as GoVideo) and focus on growth~~U.S. ~~We aggressively sold, restructured or~~Customs ~~shutdown~~and ~~our~~Border ~~businesses~~Protection which ~~were~~covered ~~either~~seven ~~not~~shipments ~~consistently generating cash from operations or which could have required future significant cash investments to become consistently cashflow positive. As a result~~ of ~~this~~DVD ~~effort,~~players ~~we currently have one subsidiary~~ with ~~operations~~unauthorized ~~(GoVideo)~~trademarks ~~and one subsidiary with no operations~~ (~~Correlant)~~see ~~but~~Notes ~~with significant~~to ~~cash~~Financial ~~and~~Statements ~~short~~Note ~~term~~12 ~~investments.~~— Litigation);

We· Increased ~~purchased GoVideo out of~~sales ~~bankruptcy~~ and ~~have~~marketing ~~grown~~efforts ~~GoVideo’s~~expended ~~revenues~~by ~~since~~our ~~the~~subsidiary, ~~purchase date. Now that GoVideo has grown and has a larger market presence~~DigiTech, ~~our~~as ~~future focus will be to manage GoVideo’s current operations in an attempt to generate~~ a ~~profit~~result ~~and~~of ~~positive cash~~being ~~flow.~~operational ~~Looking into~~ the ~~future~~entire ~~with~~nine ~~respect~~months toended ~~GoVideo~~March 31, we2006 ~~expect~~as tocompared ~~incur additional~~to ~~losses~~seven ~~for~~months during the ~~remainder~~nine ofmonths ~~fiscal~~ended March 31, 2005. AsDigiTech ~~previously~~contributed ~~discussed~~$678,000 ~~GoVideo has taken steps to reorganize certain aspects of its business~~ and ~~has undertaken cost reduction efforts,~~ ~~including reducing staff~~$176,000 ~~realigning~~during the ~~roles~~three ~~and~~months ~~responsibilities~~ended ofMarch 31, ~~management~~2006 and ~~reducing~~ ~~other operating expenses in an attempt to return to profitability. We will~~2005, ~~continue~~respectively; toand ~~focus~~$1,476,000 onand ~~our~~$389,000 ~~current~~during ~~reorganization efforts. If GoVideo is unable to return to profitability as a result of~~ the ~~current~~nine ~~realignment,~~months ~~additional~~ended ~~steps including~~March 31, ~~but not~~ ~~limited~~2006 ~~to, further cost reductions~~ and ~~the elimination of some of GoVideo’s current activities~~2005, ~~may~~respectively; ~~be necessary.~~ and

We successfully shut down Correlant’s historical operations in the unprofitable cable modem business, which reduced the cash outflow and preserved Correlant’s significant assets. Looking into the future with respect to Correlant, we expect to maintain the current level of assets during the remainder of fiscal 2005 as Correlant has no current operations. We will continue to seek market opportunities that can utilize Correlant’s significant assets to complement and improve the returns on our current operations. 22

· One-time termination 19expenses -associated with DigiTech’s reduction of its sales force in March, 2006 as a result of lower than anticipated sales.

~~Certain~~Research ~~Factors~~and ~~That~~development (“R&D”). ~~May~~R&D expenses consist primarily of personnel costs of employees ~~Affect~~engaged ~~Future~~in ~~Results~~research, design and development activities and, to a lesser extent, design prototype material expenditures and equipment and supplies required to develop new products and enhance existing products. The decrease in R&D expenses for both the three and nine months ended March 31, 2006 as compared to the three and nine months ended March 31, 2005 was directly related to the shut down of GoVideo’s historical operations and the related reduction in workforce. DigiTech had no R&D efforts or related R&D expense during the three and nine months ended March 31, 2006 or the three and nine months ended March 31, 2005.

~~Forward~~Restructuring ~~Looking Statements~~charges. ~~This~~ ~~Quarterly~~In ~~Report~~connection onwith ~~Form~~the ~~10-Q contains certain statements that are forward~~change ~~looking~~in ~~within~~its ~~the~~business ~~meaning of Section 27A of the Securities and Exchange Act of 1933~~model, as ~~amended,~~GoVideo ~~and~~recorded ~~Section 21E~~a ofrestructuring ~~the~~charge ~~Securities and Exchange Act~~ of ~~1934~~$1, ~~as amended~~013,000 ~~that~~during ~~involve risks and uncertainties. Any statements contained herein (including, without limitation, statements to~~ the ~~effect~~first ~~that~~quarter ~~the~~of ~~Company~~fiscal or2006 ~~management~~of ~~“estimates,” “expects,”~~which ~~“anticipates~~$944,”000 ~~“plans,”~~was ~~“believes,”~~separation ~~“projects,”~~expenses ~~“continues,”~~for ~~“may,”~~terminated oremployees ~~“will”~~and ~~or statements~~contractors. ~~concerning~~As ~~“potential”~~part ~~or “opportunity” or variations thereof or comparable terminology or the negative thereof), that are not statements~~ of ~~historical~~ ~~fact should be construed as forward looking statements. All statements that~~this ~~address operating performance~~restructuring, ~~events~~58 oremployees ~~developments that our management expects~~ or ~~anticipates~~ toapproximately ~~incur~~91% inof the ~~future,~~workforce ~~including statements relating to sales and earnings~~were ~~growth~~terminated orfrom ~~statements~~all ~~expressing~~functional ~~general~~areas ~~optimism~~of ~~about future operating results, are forward-looking statements~~GoVideo. ~~These~~During forward-looking statements are based on our management’s current views and assumptions regarding future events and operating performance. Many factors could cause actual results to differ materially from estimates contained in our management’s forward-looking statements including the ~~factors~~third ~~listed at~~quarter ~~pages 20 — 22. The differences may be caused by a variety~~ of ~~factors, including~~ ~~but~~Fiscal ~~not limited to adverse economic conditions~~2006, ~~competitive~~GoVideo ~~pressures,~~recorded ~~inadequate~~additional ~~capital, unexpected~~restructuring ~~costs,~~charges ~~lower revenues, net income and forecasts, the possibility~~ of ~~fluctuation and volatility of our operating results and financial condition~~$106, ~~inability to carry out~~000 ~~marketing~~associated ~~and~~with ~~sales~~additional ~~plans~~employee ~~and loss of key executives, among other things~~terminations. All ~~Because~~terminations ofwere ~~these and~~completed ~~other~~by ~~factors that may affect our operating results~~January 31, ~~past performance should not be~~ ~~considered an indicator of future performance and investors should not use historical results to anticipate results or trends in future periods~~2006.

~~GoVideo~~Other ~~may~~Income need additional capital resources. We believe GoVideo’s cash flow from operations, borrowings under its credit facility and related party debt are sufficient to fund existing operations for the foreseeable future. See “Liquidity and Capital Resources.” However, GoVideo may need additional capital to operate if: (Expense)

•Other ~~Market~~income ~~conditions~~(expense) ~~change;~~consists of interest income, interest expense, foreign exchange gain (loss) and other non-operating items. Other income during the nine months ended March 31, 2006 was attributable to selling the GoVideo IP, as previously discussed, which resulted in a one time gain of $6,505,000. The remaining activity was related to interest expense on GoVideo’s line of credit offset somewhat by interest earned from investing excess cash.

•Interest ~~Business~~expense ~~plans~~was or$16,000 ~~assumptions~~and $570,000 ~~change~~during the three months ended March 31, 2006 and 2005, respectively; and $260,000 and $1,901,000 during the nine months ended March 31, 2006 and 2005, respectively. The decreased interest expense resulted from (i) the extinguishment of $9,300,000 of GoVideo’s debt as part of selling GoVideo’s IP on July 6, 2005 as previously discussed and (ii) the decrease in the average outstanding balance, and ultimately the extinguishment, of GoVideo’s bank line of credit during the nine months ended March 31, 2006 as compared to the nine months ended March 31, 2005.

•Total Gain ~~Material~~(Loss) ~~increases~~From inDiscontinued ~~working capital become necessary; or~~Operations

•The loss ~~GoVideo’s~~from ~~lender~~discontinued ~~calls~~operations orduring ~~accelerates~~ the ~~repayment~~nine ofmonths ~~its~~ended ~~line~~March 31, 2006 ofwas ~~credit~~a ~~due~~result toof ~~noncompliance~~the ~~with debt covenants as previously discussed.~~following:

~~The Company has experienced a~~· $186,000 ~~history~~realized ofloss recurring operating losses and may not have liquidity necessary to execute its strategy and return to profitability. GoVideo is under a forbearance agreement with its lender on its line of credit due to financial covenant violations with respect to net losses incurred by GoVideo. The Company recently successfully negotiated an extension of the forbearance period from ~~the~~selling ~~current~~Correlant’s ~~expiration~~investment ~~date~~portfolio ofprior ~~February 28, 2005~~ to ~~August 31,~~ ~~2005. We believe this six month extension will allow the Company to~~maturity ~~execute~~in ~~its~~order ~~strategy of returning the Company~~ to ~~profitability.~~liquidate ~~Should~~ the ~~Company~~company; be unable to execute its strategies to return to profitability or should the Company need, but be unable to obtain, an extension beyond August 31, 2005, the Company may not have the liquidity to continue as a going concern. and

If· $300,000 ~~GoVideo~~loss ~~revenues continue to~~on ~~decrease~~the ~~for~~liquidation ~~an extended period~~ of ~~time,~~Opta’s weinvestment ~~could experience further operating losses and could have to make additional reductions~~ in ~~operating~~Correlant ~~expenses~~as toa ~~meet~~result ~~our~~of ~~obligations. GoVideo~~writing ~~revenues were~~ down ~~42% during~~ the ~~three~~investment ~~months ended March 31, 2005 as compared~~ to the ~~three~~liquidation ~~months~~value ~~ended~~at ~~March 31, 2004. Additionally, revenues during the three months ended March 31, 2005 were down 63% and 51% from the three months ended December 31, 2004 and the three months ended~~ September 30, ~~2004, respectively. Given the challenging economic environment and the business challenges facing GoVideo, we are expecting lower revenues through the end of fiscal~~ 2005. Should revenues continue to decrease for an extended period of time, we could experience further operating losses and could have to take additional steps including, but not limited to, further cost reductions and the elimination of current activities, to meet our obligations.

The ~~restatement and reaudit of our~~ ~~financial~~above ~~statements,~~losses ~~the~~were ~~additional~~somewhat ~~delays~~offset inby ~~subsequent filings and~~ the ~~potential~~interest ~~for review~~income ofearned our financial disclosure could materially impact our business and results of operations. Following the replacement of prior management, the new management began reviewing various transactions undertaken by ~~old~~Correlant ~~management prior to June 29, 2001.~~on ~~During~~ its ~~preliminary~~investments ~~investigation, new management identified certain material transactions undertaken by~~ prior ~~management that impact reported financial and operating results with respect~~ to ~~its consolidated financial statements for~~ the ~~fiscal years ended June 30, 2001, 2000 and 1999~~liquidation. Due to the preliminary results, the Company dismissed the then existing independent accountants, hired new independent accountants and reaudited all periods under investigation. The Company completed the restatement of previously reported financial statements in its Annual Report on Form 10-K for fiscal 2002 filed with the SEC on April 16, 2004. Until this filing, we were unable to become current with respect to all SEC required filings.

The gain from discontinued operations during the nine months ended March 31, 2005 was a result of settling a legal dispute with one of Correlant’s previous customers and shareholders. The dispute settlement resulted in a $1,946,000 one-time 20recovery of bad debt and a $774,000 one-time gain. Additionally, Correlant earned approximately $308,000 from its investment portfolio. The one-time gains and interest income was somewhat offset by the reduction from the non-controlling interest in the income of Correlant, which totaled $606,000.

WeSince ~~received~~the anapproval ~~SEC~~of Correlant’s ~~comment~~dissolution, ~~letter~~we ~~on March~~can 8,no ~~2005~~longer ~~with~~exercise ~~respect~~significant toinfluence ~~our~~over Correlant’s ~~Form~~operations. ~~10-K~~As ~~for~~a ~~the~~result, ~~year~~from ~~ended~~the ~~June~~date ~~30,~~that ~~2004,~~Correlant’s ~~and~~dissolution ~~subsequently~~was ~~addressed~~approved ~~all~~in ~~SEC~~August 2005, ~~comments.~~until Inthe adissolution ~~letter~~of ~~dated~~Correlant ~~March~~in ~~29,~~ December 2005, we ~~the~~accounted ~~SEC~~for ~~stated it~~Correlant ~~will~~using ~~make~~the nocost ~~further~~method ~~comments~~of accounting. InTherefore, Correlant ~~the~~had ~~future~~no weimpact ~~may~~to beour ~~required~~consolidated toresults ~~take~~of ~~additional actions~~operations ~~with~~during ~~respect~~the three tomonths ~~other~~ended ~~filings.~~March 31, 2006.

If we are required to take other actions in response to, arising out of, or relating to the restatement and reaudit of our financial statements or other late filings, such actions may require significant attention and resources of management and, regardless of the outcome, could materially impact our business and results of operations. 23

IfLiquidity we become subject to such heightened scrutiny, this could adversely affect investor confidence, our ability to access the capital markets and causeCapital the trading price for our securities to decline. In addition, we cannot assure you that we will not have to further restate earnings or further revise our reports for prior periods as a result of any SEC review. Any such restatement could further impact investor confidence, our ability to access the capital markets and the trading price of our securities. Resources

WeThe ~~and our independent auditors~~following ~~have~~table ~~identified~~summarizes ~~a number of material weaknesses related to~~ our ~~internal~~cash ~~control~~flows ~~over financial~~for reporting, which could continue to impact our ability to report our results of operations and financial condition accurately and in a timely manner. The Company has had significant financial reporting issues to address since the ~~restatement~~nine ofmonths ~~its June 30,~~ended ~~2001, 2000 and 1999 financial statements. As a result, on January~~March 1931, ~~2005,~~ ~~the Company’s external auditors informed the board of a “reportable~~2006 ~~condition”~~compared ~~that constituted a “material weakness” in our internal control over financial reporting. While we are implementing steps~~ to ~~ensure~~ the ~~effectiveness~~nine ~~of our~~months ~~internal~~ended ~~control over financial reporting~~March 31, ~~failure~~2005 to(in restore the effectiveness of our internal control over financial reporting could continue to negatively impact our ability to report our financial condition and results of operations accurately and could have a material adverse effect on our business, results of operations, financial condition and liquidity. thousands):

If the Company is unable to take the necessary corrective action to strengthen its disclosure controls, its ability to report its financial results on a timely and accurate basis may be adversely affected. Based upon the evaluation of our control weaknesses as discussed above, we concluded that our disclosure controls and procedures need to be strengthened and are not sufficiently effective. We have taken various steps to maintain the accuracy of our financial disclosures, and based on these measures and other significant work, management believes there are no material inaccuracies or omissions of material fact in our financial statements and other reports filed with the SEC. However, material weaknesses in our internal controls over financial reporting could further adversely impact our current inability to report timely financial information. If the current inability to report timely is exacerbated by weak disclosure controls, this could result in further accounting restatements or other accounting related problems and we could face greater scrutiny from the SEC.

	Nine Months Ended March 31,
	2006			2005

Net cash provided by operating activities	$	1,356		$	1,586
Net cash provided (used) by investing activities	5,124			(364		)
Net cash used by financing activities	(2,444		)	(1,838		)

~~The~~Our ~~Company~~principal ~~faces~~source ~~tough~~of ~~competition.~~liquidity ~~The~~included ~~Company’s~~cash ~~only~~and ~~operating~~cash ~~subsidiary~~equivalents ~~GoVideo~~of ~~plays~~$5,749,000 aat ~~unique niche~~March 31, in2006. aThe ~~highly~~increase ~~competitive~~from ~~industry:~~our ~~consumer~~cash ~~electronics.~~and ~~GoVideo~~cash ~~competes~~equivalents ~~against~~at ~~many~~June 30, ~~well~~2005, ~~established~~$1,713,000, ~~companies~~was ~~including~~a ~~many~~result ~~original~~of ~~equipment~~liquidating ~~manufacturers~~our ~~(“OEM”) who~~subsidiary ~~have~~Correlant. ~~substantially~~Cash ~~greater~~provided by ~~financial~~operating ~~and~~activities ~~other~~during ~~resources~~the ~~than~~nine ~~the~~months ~~Company. Additionally~~ended March 31, ~~the~~2006 ~~consumer~~was primarily ~~electronics~~due ~~industry~~to isthe ~~empirically~~collection ~~facing~~of aGoVideo’s ~~trend~~receivables ofand ~~declining~~selling the ~~gross~~existing ~~margin~~inventory ~~resulted~~at ~~from~~June 30, ~~emerging~~2005, ~~global~~both ~~market~~a ~~and~~result ~~competition.~~of ~~Although~~shutting ~~GoVideo~~down ~~was~~GoVideo’s ~~profitable~~historical inoperations. ~~fiscal~~This ~~2003, it~~ was ~~not~~somewhat ~~profitable~~offset ~~during~~by ~~fiscal~~the ~~2004~~decrease ~~nor~~in ~~during the nine~~GoVideo’s ~~months~~accounts ~~ended~~payable ~~March~~and 31accrued expenses, ~~2005.~~which ~~The~~was ~~competitive~~also ~~nature~~a result of ~~the~~shutting ~~industry~~down GoVideo’s ~~may~~historical ~~further~~operations. ~~negatively affect~~We ~~the~~expect ~~Company’s~~future ~~earnings~~cash ifprovided ~~GoVideo~~(used) isby operating ~~unable~~activities to ~~quickly~~fluctuate ~~adapt~~as we continue to ~~the~~shut down GoVideo’s ~~technological~~historical operations and ~~market~~implement ~~changes~~Opta’s ofnew ~~the~~business ~~industry~~model.

~~GoVideo’s~~For ~~customers~~the ~~have~~nine ~~the~~months ended ~~ability~~March 31, to2006, goour ~~straight~~principal toinvesting activities were attributable to the ~~contract~~proceeds ~~manufacturer~~from liquidating Correlant. As ~~GoVideo~~previously ~~has~~discussed, nowe ~~manufacturing~~received liquidation proceeds of $10,000,000 for our Series D ~~capabilities~~preferred stock and $1,276,000 for our common stock. ~~All~~These ~~products~~proceeds ~~are~~were ~~purchased~~used to payoff $5,200,000 borrowed from ~~contract~~Correlant ~~manufacturers.~~as ~~Because~~discussed ofbelow ~~this~~and $600,000 ~~there~~borrowed isfrom ~~nothing~~Correlant ~~stopping~~during ~~GoVideo’s~~fiscal ~~customers~~2005 ~~from~~plus ~~purchasing~~accrued ~~products~~interest ~~direct~~on ~~from~~ these ~~contract manufacturers~~loans. The remaining investing activity was attributable to paying $309,000 of legal fees associated with the sale of GoVideo’s IP.

WeFinancing ~~may~~activities ~~not~~for bethe ~~able~~nine tomonths ~~produce sufficient~~ended ~~quantities~~March 31, 2006 consisted of our ~~products~~subsidiary asGoVideo wereceiving ~~obtain~~advances ~~components from,~~ and ~~depend~~making ~~on,~~payments aon ~~limited~~its ~~number~~available line of ~~key suppliers~~credit. ~~All~~GoVideo’s ~~our~~line TVof ~~and~~credit ~~DVD~~was ~~player~~purchased ~~products~~by ~~contain one or~~Opta ~~more~~(as ~~components~~discussed ~~that~~above) ~~are available~~ from aWells, ~~single~~which ~~supply~~used ~~source~~cash ~~and~~totaling ~~other~~$2,148,000. ~~components that~~Additionally, ~~are~~we ~~available~~borrowed $5,200,000 from ~~limited~~Correlant, ~~sources.~~which Wewas ~~depend~~repaid on ~~these~~August 19, ~~sources~~2005 using tothe ~~meet~~proceeds ~~our~~received ~~production~~from the Series D preferred stock liquidation ~~requirements~~as discussed above. WeLastly, dowe ~~not~~paid ~~have~~off ~~any~~the ~~long~~note ~~term~~to ~~supply~~TCLMM, ~~contracts.~~which ~~Although~~used approximately we$1,726,000 doof ~~not~~cash. ~~presently anticipate~~To a ~~disruption~~lesser inextent, ~~this~~cash ~~source~~provided by financing activities was a result of ~~supply~~our subsidiary, ifDigiTech, itincreasing isits ~~necessary~~short ~~for~~term usloan tofrom ~~obtain~~TCL ~~these~~to ~~key~~$989,000. ~~components~~The ~~from~~terms anof ~~alternative~~the ~~supplier~~original $725,000 itloan, ~~could~~which ~~take~~was ~~several~~entered ~~months~~into ~~before~~April 19, ~~receiving~~2005, ~~adequate~~remained ~~supplies,~~in ~~and~~effect. ~~during~~The ~~this~~annual ~~time~~interest werate ~~would~~is be5.2% ~~unable~~and tointerest ~~satisfy~~is ~~our~~paid ~~customers’~~upon ~~demands~~maturity of the loan. InCurrently, ~~such~~the ~~event~~loan matures on June 30, ~~prolonged~~2006, but ~~delays~~may ~~could~~be ~~result~~automatically inextended ~~the~~for ~~cancellation of~~an ~~orders~~additional six month terms if DigiTech and ~~the~~TCL ~~loss~~mutually ofagree ~~customers.~~to renew the loan.

-Cash 21and -Working Capital Requirements

~~GoVideo~~As ~~purchases~~a ~~products~~result ~~from~~of ~~countries~~selling inGoVideo’s ~~Asia~~IP, ~~including~~Opta’s ~~China,~~purchase ~~South~~of ~~Korea~~GoVideo’s ~~and~~loan ~~Taiwan,~~with ~~where~~Wells ~~there~~and ~~are~~the ~~risks~~shut ~~associated~~down ~~with~~of ~~the~~GoVideo’s ~~potential~~historical ~~change~~operations inas ~~social,~~a ~~political~~consumer ~~and~~electronics ~~regulatory~~OEM ~~and economic~~in ~~conditions.~~anticipation ~~Significant~~of ~~changes~~implementing ina ~~the~~new ~~social~~business model, ~~political~~our ~~and~~cash ~~regulatory~~required ~~and~~to ~~economic~~operate ~~conditions~~has ~~could~~significantly ~~adversely~~decreased. ~~affect~~Management ~~GoVideo~~anticipates ~~through~~the ~~increased~~Company ~~costs,~~has ~~unavailability~~sufficient ofcash ~~goods~~to operate the orscaled ~~increased~~back ~~tariffs.~~operations Asfor athe ~~result~~12 months following the date of ~~trade~~this ~~disputes~~filing. However, if the USCompany ~~has~~cannot ~~occasionally~~successfully ~~imposed tariffs,~~settle ~~regulatory~~its ~~procedures~~current ~~and~~legal ~~importation~~disputes ~~bans~~(see on“Notes to ~~certain~~the ~~products.~~Financial ~~Trade~~Statements ~~sanctions~~ Note 12 — Litigation”) or ~~regulatory~~should ~~procedures~~our ~~involving~~cash requirements aexceed ~~country~~cash inavailable ~~which~~from operations we ~~conduct~~cannot aassure ~~substantial~~that additional ~~amount~~sources of ~~business~~ ~~could~~financing ~~have~~would abe ~~material~~available ~~adverse~~to ~~effect~~us on ~~our~~commercially favorable ~~operations.~~terms, if at all.

GoVideo is responsible for product warranties and defects. Although GoVideo outsources all product manufacturing, it provides limited labor and parts warranties on certain of its products for a maximum of one year. Therefore, GoVideo is highly dependent upon the quality of its suppliers. 24

~~Our~~Contractual new products may not be well accepted. Our future success depends on GoVideo’s ability to continue to design and develop and win acceptance of its products and services, which are offered in highly competitive markets characterized by continual product introductions, rapid development in technology, and subjective and changing consumer preferences. Obligations

The ~~introduction or expected~~ ~~introduction~~following oftable ~~new~~summarizes ~~products~~our orcontractual ~~technologies~~obligations ~~may~~at ~~depress sales of existing products and technologies. As~~March ~~GoVideo maintains~~31, ~~a substantial investment in product inventory~~2006, and the ~~introduction~~effect ofsuch ~~new~~obligations ~~products~~are ~~may~~expected ~~force us~~ to ~~charge~~have ~~less~~on ~~for~~ our ~~existing inventory~~liquidity and ~~cause such existing inventory to become obsolete. Such declining prices and~~cash ~~inventory~~flows ~~obsolescence~~in ~~could~~future ~~have~~periods a(in ~~material adverse effect on our business and financial results.~~ thousands):

We are exposed to the risks associated with the decision to cease cable modem-related business by Correlant, our subsidiary. The Company is actively seeking a viable business model for Correlant to maximize our stockholders’ interest. Even if a viable business model is found that will correspond with Correlant’s available cash size, there is still no guarantee the model will succeed. We successfully reduced Correlant’s cash burn rate by winding down Correlant’s historical operations in the cable modem industry. However, since shutting down the operations, which was substantially completed March 2004, we have been unable to identify and secure a viable business plan that will utilize Correlant’s assets.

	Total		Less Than One Year		Greater Than One Year

Operating lease obligations	$	17	$	17	$	—
Inventory purchase obligations	—		—		—
Total contractual cash obligations	$	17	$	17	$	—

Our ~~stock~~only ~~price may not come back.~~contractual ~~The~~obligation ~~Company’s stock was removed from OTC Bulletin Board~~ as ~~a result~~ of ~~the Company’s failure to timely submit its Annual Report on Form 10-K for fiscal 2002~~March 31, ~~2003~~ ~~and~~2006 ~~2004.~~relates ~~Although~~to ~~we filed~~ our ~~Annual~~corporate ~~Reports~~office onlease. ~~Form~~As ~~10-K~~of ~~for fiscal 2002, 2003 and 2004 and our Quarterly Report on Form 10-Q for September 30, 2004 on April~~February 161, ~~2004~~2006, ~~August~~ ~~24,~~GoVideo ~~2004,~~operates ~~February~~under ~~18,~~a ~~2005 and April 8, 2005, respectively, we are not eligible~~ month-to-month ~~trade~~lease ~~on the OTC Bulletin Board until we become current~~ in ~~all our required filings or until we file~~ a ~~Form~~2,400 10square ~~and~~foot ~~clear~~office ~~all~~used ~~comments~~for ~~with~~administrative ~~the SEC~~operations. ~~The current trading of the Company~~GoVideo’s ~~stock is sporadic and minimal and there is no established public trading~~ ~~market~~new ~~for~~business ~~our~~model ~~common~~does ~~stock.~~not Inrequire ~~addition,~~any ~~the~~warehousing stock market has experienced extreme price and volume fluctuations that have affected the market price of many technology companies, in particular, and that have often been unrelated to the operating performance of these companies. These factors, as well as general economic and political conditions, may materially adversely affect the market price of our common stock in the future. Additionally, volatility or adistribution ~~lack of positive performance in our stock price may adversely affect our ability to retain key employees~~facilities.

~~Our executive officers and key~~As ~~personnel~~a ~~are~~result ~~critical to our business and the loss~~ of ~~their services could disrupt our operations and our customer relationships. Our success depends to a significant degree upon~~ the ~~continuing~~change ~~contributions~~in ofGoVideo’s ~~our~~business ~~key management~~model, ~~technical,~~there ~~marketing~~were ~~and sales employees. There can be~~ no ~~assurance that we will be successful in retaining our key~~inventory ~~employees~~purchase orobligations ~~that~~outstanding weat ~~can~~March 31, ~~attract and retain additional skilled personnel as required~~2006. ~~The loss of the services of key personnel could significantly harm our results of operations and business.~~

~~Because~~Off-Balance ofSheet these and other factors affecting our operating results, past financial performance should not be considered an indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods. Arrangements

At March 31, 2006, we did not have any relationship with unconsolidated entities or financial partnerships, which other companies have established for the purpose of facilitating off-balance sheet 22arrangements or other contractually narrow or limited purposes as defined in Item 303(a)(4)(ii) of SEC Regulation S-K. Therefore, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

~~Critical Accounting Policies~~ Trends

~~The~~Our ~~discussion~~operations have significantly changed over the past several years. We transitioned our operations from the development, manufacture and ~~analysis~~distribution of ~~our~~products used for broadband Internet access, ~~financial~~including ~~condition~~data-over-cable equipment and ~~results~~networking devices to the development, marketing, and distribution of ~~operations~~innovative, ~~are~~high ~~based~~performance onconsumer electronic products. During the ~~consolidated~~nine ~~financial~~months ended March 31, ~~statements~~2006, ~~which~~GoVideo ~~have~~began ~~been~~shutting ~~prepared~~down its historical operations in anticipation ~~accordance~~of ~~with~~changing ~~accounting~~its ~~principles~~business ~~generally~~model. Currently, GoVideo has no business plan that generates revenue and Opta ~~accepted~~is in the Uprocess of implementing a new business model in which it will act as a brand licenser.S. ~~The~~As ~~preparation~~a ofresult, ~~these~~there ~~financial~~are ~~statements~~no ~~requires~~meaningful ~~estimates~~current ~~and~~or ~~assumptions~~historical ~~that~~trends ~~affect~~in ~~the~~production, ~~reported~~sales ~~amounts~~or ~~and~~inventory, ~~disclosures.~~product backlog, product costs, selling prices or levels of operating expenses.

WeAs ~~believe~~of the ~~following,~~date ~~among~~of ~~others,~~this ~~to be critical accounting policies. That is~~report, ~~they are both important~~ to the ~~portrayal~~ best of our ~~financial~~knowledge, ~~condition~~no ~~and~~known ~~results~~trends ofor ~~operations~~demands, ~~and they require critical~~ ~~management~~commitments, ~~judgments~~events ~~and~~or ~~estimates~~uncertainties, ~~about~~except ~~matters~~as ~~that~~described ~~are~~in ~~inherently uncertain~~“PART II. ~~Although we~~Item ~~believe~~1 ~~our~~- Legal ~~judgments~~Proceedings” ~~and~~existed, ~~estimates~~which are ~~appropriate~~likely ~~and~~to ~~correct,~~have ~~actual~~a ~~future~~material ~~results may~~effect ~~differ from~~ on our ~~estimates~~liquidity.

•Risks ~~Revenue recognition. We recognize revenue upon passage of title of our product in accordance with the Securities~~ and Exchange Commission (“SEC”) Staff Accounting Bulletin 101, Revenue Recognition in Financial Statements (“SAB 101”), as amended by SAB 101A and 101B. At the time revenue is recognized, GoVideo records an allowance for estimated sales returns based on estimates derived from historical trends. Sales returns are recorded with net revenues. GoVideo also establishes an allowance for estimated payment term discounts expected to be taken by customers based on analysis of historical trends. Payment term discounts granted are recorded in net revenues.Uncertainties

•This ~~Warranty~~Quarterly ~~Reserves.~~Report Goon ~~Video~~Form 10-Q ~~provides~~contains statements ~~limited~~that ~~labor~~are ~~and~~forward-looking. ~~parts~~These ~~warranties~~statements are based on ~~certain~~current expectations ofand ~~its~~assumptions ~~products~~that ~~for~~are asubject ~~maximum~~to ofrisks ~~one~~and ~~year~~uncertainties. Actual Goresults ~~Video~~could ~~records~~differ amaterially ~~warranty~~because ~~reserve~~of ~~based~~risks ~~upon~~and ~~historical~~uncertainties ~~experience~~such as those listed below and anelsewhere ~~estimate~~in ofthis ~~total~~report, ~~exposure~~which, ~~associated~~among ~~with~~others, ~~products~~should be ~~sold~~considered toin ~~consumers~~evaluating ~~through~~our ~~retail~~financial ~~outlets~~outlook.

•Business ~~Bad~~Strategy ~~debt reserves. We conduct business~~ and Operation extend credit based on an evaluation of our customers’ financial condition generally without requiring collateral. Exposure to losses on trade receivables is expected to vary by customer due to the financial condition of each customer. We monitor exposure to credit losses and maintain allowances for anticipated losses considered necessary under the circumstances. Delinquent notes and trade accounts receivable are charged against the allowance for doubtful accounts once uncollectibility has been determined. The allowance is determined through an analysis of the aging of accounts receivable and assessments of risk based on historical trends and an evaluation of the impact of current and projected economic conditions. We evaluate the past-due status of our notes and related parties and trade receivables based on contractual terms of sale. If the financial condition of our customers were to deteriorate, this could result in an impairment of ability to make payments, and additional allowances may be required.Risks

~~• Related party transactions.~~ We ~~have~~intend ~~significant~~to ~~related~~implement ~~party~~a ~~transactions~~new ~~and~~business ~~agreements;~~model. ~~many~~Opta ofis ~~which~~currently ~~are~~implementing ~~complex.~~a Wenew business ~~believe~~model ~~such~~that ~~transactions~~intends ~~have~~to ~~been~~capitalize ~~accounted~~on ~~for~~the atbrand ~~fair~~name ~~value.~~recognition and Wesublicense ~~utilized~~the ~~our~~GoVideo ~~best~~brand ~~estimate~~name ofby ~~the~~bridging ~~value~~international manufacturers of ~~these~~consumer ~~transactions~~electronics ~~and~~to ~~agreements~~domestic retailers. ~~Had~~There ~~alternative~~is ~~assumptions~~no ~~been~~assurance ~~used,~~that ~~the~~Opta ~~values~~can ~~obtained~~successfully ~~may have been different.~~

• Inventories. GoVideo’s inventory consists of mostly finished goods, some of which are in transit from its contract manufacturer. Inventories are stated at the lower of cost or market with cost being determined on a first-in, first-out basis. We write down our inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of the inventory and the estimated market value based upon assumptions about future demand and market conditions.25

•transition ~~Investments.~~to Our investments consist primarily of corporate debt and government securities. Investments are stated at fair value based on quoted market prices obtained from an independent banker. Investments are classified as available-for-sale based on management’s intended use. As of March 31, 2005 the ~~cost~~new ofbusiness ~~our investments approximated fair value~~model.

•GoVideo ~~Impairment~~may ofneed ~~other~~additional ~~long-lived~~capital ~~assets~~resources. ~~Other~~We ~~long-lived~~believe ~~assets,~~GoVideo’s ~~such~~cash asand ~~property~~other sources ~~and~~of ~~equipment,~~liquidity are ~~amortized~~sufficient orto ~~depreciated~~fund ~~over~~its ~~their~~down-sized ~~estimated~~operations ~~useful lives. These assets are reviewed~~ for ~~impairment whenever events or circumstances provide evidence that suggest that~~ the foreseeable ~~carrying~~future. ~~amount~~See of“Liquidity ~~the~~and ~~asset~~Capital Resources” ~~may~~discussed ~~not be recoverable, with impairment being based upon an evaluation of the identifiable undiscounted cash flows~~above. ~~If the asset has been impaired~~However, ~~the~~GoVideo ~~resulting~~may ~~charge~~need ~~reflects~~additional capital ~~the~~to ~~excess~~operate ~~of the asset’s carrying cost over its fair value.~~if:

-· GoVideo 23does not prevail in its current legal dispute with Daewoo or its petition for relief to U.S. Customs and Border Protection, each as described in “PART II. Item 1 - Legal Proceedings;”

~~Recently~~· Market ~~Issued Accounting~~conditions ~~Standards~~ change;

In· Business ~~November 2004,~~plans ~~the~~or ~~Financial Accounting~~assumptions Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) 151, Inventory Costs (“SFAS 151”), which revised Accounting Research Bulletin (“ARB”) 43, relating to inventory costs. This revision is to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage). SFAS 151 requires that these items be recognized as a current period charge regardless of whether they meet the criterion specified in ARB 43. In addition, this Statement requires the allocation of fixed production overheads to the costs of conversion be based on normal capacity of the production facilities. SFAS 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. We do not believe the adoption of SFAS 151 will have a material impact on our financial statements. change;

In· GoVideo ~~December 2004,~~does ~~the~~not ~~FASB issued~~identify ~~SFAS 123R, Share-Based Payment (“SFAS 123R”) which is a revision of SFAS 123~~ and ~~supersedes~~successfully ~~Accounting~~implement Principles Board (“APB”) 25, Accounting for Stock Issued to Employees (“APB 25”). Among other items, SFAS 123R eliminates the use of APB 25 and the intrinsic value method of accounting, and requires companies to recognize the cost of employee services received in exchange for awards of equity instruments, based on the grant date fair value of those awards, in the financial statements. The effective date of SFAS 123R is the first reporting period beginning after June 15, 2005. SFAS 123R permits companies to adopt its requirements using either a ~~“modified~~ ~~prospective”~~new ~~method, or a “modified retrospective” method.~~business ~~Under~~model the “modified prospective” method, compensation cost is recognized in the financial statements beginning with the effective date, based on the requirements of SFAS 123R for all share-based payments granted after that ~~date,~~generates ~~and~~revenue; based on the requirements of SFAS 123 for all unvested awards granted prior to the effective date of SFAS 123R. Under the “modified retrospective” method, the requirements are the same as under the “modified prospective” method, but also permits entities to restate financial statements of previous periods based on proforma disclosures made in accordance with SFAS 123. or

~~The~~· Material ~~Company~~increases ~~currently~~in ~~utilizes~~working acapital ~~standard~~become ~~option pricing model (i~~necessary.e., Black-Scholes) to measure the fair value of stock options granted to Employees. While SFAS 123R permits entities to continue to use such a model, the standard also permits the use of a “lattice” model. The Company has not yet determined which model it will use to measure the fair value of employee stock options upon the adoption of SFAS 123R.

The Company ~~currently~~faces ~~expects~~tough tocompetition. Our subsidiary, DigiTech, operates in ~~adopt~~the ~~SFAS~~highly ~~123R~~competitive ~~effective~~consumer ~~July 1,~~electronics ~~2005~~industry. ~~However,~~DigiTech ~~because~~competes against many well established companies including many OEMs who have substantially greater financial and other resources than the Company. ~~has~~Additionally, ~~not yet~~the ~~determined~~consumer ~~which~~electronics industry is empirically facing a trend of ~~the~~declining ~~aforementioned~~gross margin ~~adoption~~resulting ~~methods~~from itemerging ~~will~~global ~~use,~~market ~~the~~and ~~Company~~competition. DigiTech has not ~~yet~~been ~~determined~~profitable ~~the~~since ~~impact~~its ofinception ~~adopting~~in ~~SFAS~~July 2004. ~~123R~~Additionally, DigiTech has had to borrow funds from related parties to stay operational. If DigiTech is unable to achieve and sustain profitability in the future, DigiTech’s business operations may fail forcing us to cease its operations.

-GoVideo 24is -responsible for product warranties and defects. Although GoVideo outsources all product manufacturing, it provides limited labor and parts warranties on certain of its products for a maximum of one year. Therefore, GoVideo is highly dependent upon the quality of its suppliers. See discussion of GoVideo’s current legal dispute with Daewoo, as described in Note 12 — Litigation. If products have defects, this could hurt our reputation as well as cause customer collection problems. As a result of GoVideo shutting down its historical operations, which was substantially complete by January 31, 2006, all products sold by GoVideo will be outside the product warranty period by January 31, 2007.

~~Item~~Our 3new –products ~~Quantitative~~may not be well accepted. DigiTech’s future success depends on its ability to continue to win market acceptance of its products and ~~Qualitative~~services, which ~~Disclosures~~are ~~About~~offered ~~Market~~in ~~Risk:~~highly competitive markets characterized by continual product introductions, rapid development in technology, and subjective and changing consumer preferences.

~~Interest~~The ~~Risk.~~introduction ~~Our~~or ~~exposure~~expected ~~to market~~introduction ~~risk~~of ~~for changes in interest rates relates primarily to our investment portfolio.~~new Weproducts door ~~not~~technologies ~~use~~may ~~derivative~~depress ~~financial~~sales ~~instruments~~of inexisting ~~our~~products ~~investment portfolio~~and technologies. ~~We place our~~As Digitech ~~investments~~maintains ~~with~~a ~~high~~relatively ~~credit~~substantial ~~quality~~investment ~~issuers~~in ~~and,~~product ~~by policy~~inventory, ~~limit~~ the introduction ~~amount~~ of ~~credit exposure~~new toproducts ~~any~~may ~~one~~force ~~issuer.~~DigiTech ~~We are averse~~ to ~~principal~~charge ~~loss~~less ~~and~~for ~~ensure~~its ~~the~~existing inventory ~~safety~~ and ~~preservation~~ ofcause ~~invested~~such ~~funds~~existing byinventory ~~limiting~~to ~~default~~become ~~risk, market risk, and reinvestment risk~~obsolete. WeSuch ~~minimize our risk by investing in only the safest and highest credit quality~~declining ~~securities~~prices and byinventory ~~constantly~~obsolescence ~~positioning~~could ~~our~~have ~~portfolio to respond appropriately to~~ a ~~significant~~ ~~reduction~~material inadverse aeffect ~~credit~~on ~~rating of any investment issuer or guarantor. Our~~our ~~portfolio~~business ~~includes only corporate debt~~ and ~~government~~financial ~~securities~~results.

~~Foreign~~Our ~~Currency~~executive ~~Risk.~~officers ~~The~~and key personnel are ~~majority~~critical ofto our ~~transactions~~business ~~are~~and ~~denominated~~the inloss ~~the~~of ~~U.S.~~their ~~dollar~~services could disrupt our operations and our customer relationships. ~~Therefore,~~Our wesuccess dodepends ~~not~~to ~~have~~a significant ~~any~~degree ~~hedging~~upon orthe ~~similar~~continuing ~~foreign~~contributions ~~currency~~of ~~contracts.~~our Tokey ~~date~~management, wetechnical, marketing ~~have~~and ~~not~~sales ~~experienced~~employees. ~~any~~There can be no assurance that we will be ~~material~~successful ~~foreign~~in ~~currency~~retaining ~~exchange~~our ~~rate~~key ~~gains~~employees or ~~losses~~that ~~associated~~we ~~with~~can ~~foreign~~attract ~~currency transactions~~ and doretain additional ~~not~~skilled ~~expect~~personnel ~~any~~as ~~significant~~required. ~~changes~~The inloss ~~foreign~~of ~~currency~~the ~~exposure~~services inof ~~the~~key ~~near~~personnel ~~future.~~could significantly harm our results of operations and business.

~~Item~~The Company 4may –not ~~Controls~~have the ability to continue as a going concern. The Company incurred net losses of $2,186,000 and ~~Procedures:~~$7,138,000 during the three and nine months ended March 31, 2006, respectively, and $18,861,000 and $7,722,000 during the fiscal years ended June 30, 2005 and 2004, respectively. And at March 31, 2006, the Company had an accumulated deficit of $131,610,000.

InThe ~~connection~~continued ~~with~~losses, ~~the~~negative ~~audit~~working ofcapital ~~our~~at March 31, 2006 ~~financial~~of ~~statements~~($5,741,000) ~~for~~and ~~the~~lack ~~year~~of ~~ended~~a ~~June 30,~~successful ~~2004,~~business ~~Hein~~plan &raise ~~Associates~~substantial ~~LLP~~doubt ~~(“Hein”),~~about ~~our~~the ~~independent~~Company’s ~~auditors,~~ability ~~informed~~to ~~the~~continue ~~Board~~as ofa ~~Directors~~going onconcern. Although the ~~January 19,~~Company ~~2005~~anticipates ofthat aits ~~“reportable~~current ~~condition”~~cash ~~that~~and ~~constituted~~cash aequivalents and the ability ~~“material~~to ~~weakness”~~borrow infrom ~~our~~related ~~internal~~parties ~~control~~will ~~over~~be ~~financial~~sufficient ~~reporting~~to ~~under standards~~fund ~~established~~its byoperations for at least the ~~American~~next ~~Institute~~twelve ofmonths, ~~Certified~~this ~~Public~~assumes ~~Accountants (“AICPA”),~~that asGoVideo ~~previously~~successfully ~~reported~~manages its inexisting ~~our~~liabilities. ~~Annual~~See ~~Report~~“PART II. onItem ~~Form~~1 10-K ~~for~~Legal ~~the year~~Proceedings.” ~~ended~~However, ~~June~~if ~~30,~~GoVideo ~~2004.~~does not successfully

Although the communication from our independent auditors did not specifically mention a weakness with respect to “disclosure controls and procedures,” management, including the Chief Executive Officer, Chief Financial Officer and Chief Operating Officer concluded, that the material weakness conditions described in our Annual Report on Form 10-K for the year ended June 30, 2004 also relate to our disclosure controls and procedures as of March 31, 2005. The interim and longer term steps described in our Annual Report on Form 10-K for the year ended June 30, 2004 are applicable to improving the effectiveness of our disclosure controls and procedures. We created a Disclosure Committee to ensure compliance with the disclosure controls and procedures and to evaluate the effectiveness of those controls and procedures on a regular basis. Subsequent to the formation of the Disclosure Committee, Opta adopted a Disclosure Committee Charter (“Charter”). The Company will provide a copy of our Charter, free of charge, upon written request sent to our principal executive office. 26

~~(b) Changes~~manage inits ~~internal~~liabilities, ~~control over financial reporting. There were no changes in our internal controls over financial reporting identified in connection with~~ the ~~evaluation~~Company ~~required~~may bybe ~~paragraph~~forced ~~(d) of Exchange Act rules 13a-15 or 15d-15 that occurred during the three months ended March 31, 2005 that have materially affected, or are reasonably likely~~ to ~~materially~~borrow ~~affect, our~~additional ~~internal controls over financial reporting. However~~funds, aswhich acould ~~result~~increase ~~of receiving notification of a “material weakness” from Hein, we are currently in~~ the ~~process~~risk of ~~taking~~operating ~~a number of steps to improve the effectiveness of our internal control,~~ as ~~previously~~a ~~reported~~going ~~in our Annual Report on Form 10-K for the year ended June 30, 2004~~concern.

~~PART~~Financial ~~II. OTHER INFORMATION~~Reporting

~~Item~~We and 1our —independent ~~Legal~~auditors ~~Proceedings:~~have identified a number of significant deficiencies related to our internal control over financial reporting that collectively represent a material weakness, which could continue to impact our ability to report our results of operations and financial condition accurately and in a timely manner. While we are implementing steps to ensure the effectiveness of our internal control over financial reporting, failure to restore the effectiveness of our internal control over financial reporting could continue to negatively impact our ability to report our financial condition and results of operations accurately and could have a material adverse effect on our business, results of operations, financial condition and liquidity.

~~From~~We have ~~time~~identified toa ~~time~~number weof ~~may~~failures bein ~~involved~~the ~~in various~~Company’s ~~disputes~~disclosure controls and procedures, ~~litigation~~which ~~matters~~have ~~arising~~impacted inour ~~the~~ability ~~normal~~to ~~course~~report ofour ~~business.~~results As of operations ~~May~~and ~~16,~~financial ~~2005,~~condition weaccurately ~~are~~and ~~not~~in ~~involved~~a intimely ~~any~~manner. ~~legal~~If ~~proceedings~~the ~~that~~Company ~~are~~is ~~expected~~unable to ~~have~~take athe ~~material~~necessary ~~adverse~~corrective ~~effect~~action onto ~~our~~strengthen ~~consolidated~~its ~~financial~~disclosure ~~position~~controls, its ability to report its financial results ofon ~~operations~~a ortimely and accurate basis may be further ~~cash~~adversely ~~flows~~affected. ~~However~~Accordingly, ~~litigation~~we isconcluded ~~subject~~that our disclosure controls and procedures need to ~~inherent~~be ~~uncertainties.~~strengthened ~~Were~~and anare ~~unfavorable~~not sufficiently effective. We have ~~ruling~~taken tovarious ~~occur,~~steps ~~there~~to ~~exists~~maintain the ~~possibility~~accuracy of aour ~~material~~financial ~~adverse~~disclosures, ~~impact~~and based on ~~our~~these ~~results~~measures and other significant work, management believes there ofare ~~operations~~no material inaccuracies or omissions of ~~the~~material ~~period~~fact in ~~which~~our ~~the~~financial statements ~~ruling~~and ~~occurs.~~other ~~Our~~reports ~~estimate~~filed ofwith the ~~potential~~SEC. However, material weaknesses ~~impact~~in onour disclosure controls and internal controls over financial reporting could further adversely impact our current inability to report timely financial ~~position~~and other orinformation. ~~overall~~If ~~results~~the ofcurrent ~~operations~~inability ~~for~~to ~~new~~report ~~legal~~timely is exacerbated by ~~proceedings~~weak disclosure controls, this could ~~change~~result in further accounting restatements or other accounting related problems and greater scrutiny from the ~~future~~SEC.

-We 25may -not complete our Going Private Transaction in a timely manner, which will cause us to incur additional costs and mitigate the benefits of going private. We are pursuing the Going Private Transaction to relieve us of the costs, administrative burdens and competitive disadvantages associated with operating as a public company. Until the Going Private Transaction becomes effective, we must continue to incur costs associated with being a public company.

~~Item~~The 2restatement –and reaudit ~~Unregistered~~of ~~Sales~~our financial statements and the potential for review of ~~Equity~~our financial ~~Securities~~disclosure could materially impact our business and ~~Use~~results of operations. ~~Proceeds~~Following the replacement of prior management, the new management began reviewing various transactions undertaken by old management prior to June 29, 2001. During its preliminary investigation, new management identified certain material transactions undertaken by prior management that impact reported financial and operating results with respect to its consolidated financial statements for the fiscal years ended June 30, 2001, 2000 and 1999. Due to the preliminary results, the Company dismissed the then existing independent accountants, hired new independent accountants and reaudited all periods under investigation. The Company completed the restatement of previously reported financial statement in its Form 10-K for fiscal 2002 filed April 16, 2004.

~~Recent~~As ~~Sales~~a result of ~~Unregistered~~the ~~Securities~~restatement and reaudit of our financial statements for fiscal 2001, 2000 and 1999 and the resulting delay in filing SEC reports, the SEC or other governmental authorities may choose to review our SEC filings. If we are required to respond to the SEC or other governmental authorities or otherwise take actions in response to, arising out of, or relating to the restatement and reaudit of our financial statements, such actions may require significant attention and resources of management and, regardless of the outcome, could materially impact our business and results of operations. If we become subject to such heightened scrutiny, this could adversely affect investor confidence, our ability to access the capital markets and cause the trading price for our securities to decline. In addition, we cannot assure you that we will not have to further restate earnings or further revise our reports for prior periods as a result of any SEC review. Any such restatement could further impact investor confidence, our ability to access the capital markets and the trading price of our securities.

~~There were no sales of unregistered securities by the Company during the quarter ended March 31, 2005.~~ 27

~~Issuer~~Additional ~~Purchases~~delays in reporting. Since the restatement and reaudit of ~~Equity~~our ~~Securities~~financial statements discussed above, we have been unable to remain current with respect to all SEC required filings. This compounds the potential problems associated with the original reaudit of our financial statements for the fiscal years ended June 30, 2001, 2000 and 1999 and the resulting delay in filing our Form 10-K for fiscal 2002, 2003, 2004 and 2005.

Date of Purchase	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs
January 1 through	None	-	None	None
January 31, 2005
February 1 through	None	-	None	None
February 28, 2005
March 1 through	None	-	None	None
March 31, 2005

Stock Market Risks

Our stock price may not come back. The Company’s ~~has~~stock ~~not~~was ~~publicly~~removed from OTC ~~announced~~Bulletin ~~any~~Board ~~plans~~as a result of the Company’s failure to ~~purchase~~timely ~~Opta~~submit ~~stock~~the Form 10-K for fiscal 2002. InAlthough ~~the~~Opta ~~past~~filed its Form 10-K for fiscal 2002 on April 16, 2004, Opta is not eligible to trade on the OTC Bulletin Board until ofOpta ~~Directors~~becomes ~~reviewed~~current in all its required filings or files a Form 10 and ~~approved~~clears ~~repurchases~~all ofcomments ~~its~~with ~~common~~the SEC. The current trading of the Company’s stock onis asporadic ~~case~~and byminimal ~~case~~and ~~basis~~there is no established public trading market for our common stock. In addition, the ~~Company~~ stock market has noexperienced ~~plans~~extreme price inand volume fluctuations that have affected the ~~future~~market toprice ~~publicly~~of ~~announce~~many technology ~~any~~companies, ~~stock~~in ~~repurchase~~particular, ~~plans.~~and ~~The~~that have often been unrelated to the ~~Board~~operating performance of ~~Directors~~these ~~plans~~companies. toThese ~~continue~~factors, toas ~~review~~well ~~potential~~as ~~repurchases~~general economic and political conditions, may materially adversely affect the market price of ~~its~~our common stock in the future. Additionally, volatility or a lack of ~~and~~positive ~~will~~performance ~~continue~~in toour ~~approve~~stock ~~the~~price ~~repurchase~~may ~~transactions~~adversely onaffect aour ~~case~~ability byto retain ~~case~~key ~~basis~~employees.

~~Item~~Because 3of —these ~~Defaults~~and ~~Upon~~other ~~Senior~~factors affecting our operating results, past financial performance should not be considered an indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.

~~Applicable~~Critical Accounting Policies

~~Item~~The 4discussion —and ~~Submission~~analysis of ~~Matters~~our tofinancial condition aand ~~Vote~~results of ~~Security~~operations ~~Holders~~are based on the 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 estimates and assumptions that affect the reported amounts and disclosures.

~~Not~~We ~~Applicable~~believe the following, among others, to be critical accounting policies. That is, they are both important to the portrayal of our financial condition and results of operations, and they require critical management judgments and estimates about matters that are inherently uncertain. Although we believe our judgments and estimates are appropriate and correct, actual future results may differ from our estimates.

~~Item~~· Revenue 5recognition. —We ~~Other~~recognize revenue upon passage of title of our product in accordance with the Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin 101, Revenue Recognition in Financial Statements (“SAB 101”), as amended by SAB 101A and 101B. At the time revenue is recognized, GoVideo and DigiTech record an allowance for estimated sales returns based on estimates derived from historical trends and current market conditions. Sales returns are recorded with net revenues. GoVideo also establishes an allowance for estimated payment term discounts expected to be taken by customers based on analysis of historical trends. Payment term discounts granted are recorded as a reduction to net revenues.

~~Information~~· Warranty Reserves. GoVideo provides limited labor and parts warranties on certain of its products for a maximum of one year. GoVideo records a warranty reserve based upon historical experience and an estimate of total exposure associated with products sold to consumers through retail outlets. DigiTech does not provide a product warranty. The warranty liability for product is the responsibility of the third-party manufacturer.

~~Not~~· Bad ~~Applicable~~debt reserves. We conduct business and extend credit based on an evaluation of our customers’ financial condition generally without requiring collateral. Exposure to losses on trade receivables is expected to vary by customer due to the financial condition of each customer. We monitor exposure to credit losses and maintain allowances for anticipated losses considered necessary under the circumstances. Delinquent notes and trade accounts receivable are charged against the allowance for doubtful accounts once uncollectibility has been determined. The allowance is determined through an analysis of the aging of accounts receivable and assessments of risk based on historical trends and an evaluation of the impact of

~~Item 6 — Exhibits~~28

Exhibit Number	Description of Exhibit	Method of Filing
3.1	Certificate of Incorporation, as amended	Incorporated by reference to Exhibit 3.1
		to Form 10-K, filed February 18, 2005
3.2	Amended and Restated Bylaws	Incorporated by reference to Exhibit 3.2
		to Form 10, filed October 27, 1998
3.3	Amendment to Bylaws	Incorporated by reference to Exhibit
		99.1 to Form 8-K, filed July 2, 2001
10.1	2000 Equity Incentive Plan	Incorporated by reference to Exhibit A
		to Proxy Statement on Schedule 14A filed
		April 4, 2000
10.2	Opta Executive Employment Agreement	Incorporated by reference to Exhibit
		10.11 to Form 10-K, filed October 15,
		2001
10.3	Sale agreement of TCL Digital dated December	Incorporated by reference to Exhibit
	20, 2003	10.9 to Form 10-K, filed April 16, 2004
10.4	Current Lease - GoVideo Office Lease	Incorporated by reference to Exhibit
		10.10 to Form 10-K, filed April 16, 2004
10.5	Current Lease - Go Video Lease for Commercial	Incorporated by reference to Exhibit
	Space	10.11 to Form 10-K, filed April 16, 2004
10.6	Current Lease - Opta Corporation Executive	Incorporated by reference to Exhibit
	Office Lease	10.9 to Form 10-K, filed February 18,
		2005

current and projected economic conditions. We evaluate the past-due status of our notes and related parties and trade receivables based on contractual terms of sale. If the financial condition of our customers were to deteriorate, this could result in an impairment of ability to make payments, and additional allowances may be required.

-· Related 26party -transactions. We have significant related party transactions and agreements; many of which are complex. We believe such transactions have been accounted for at fair value. We utilized our best estimate of the value of these transactions and agreements. Had alternative assumptions been used, the values obtained may have been different.

Exhibit Number	Description of Exhibit	Method of Filing
10.7	Debt agreement between GoVideo and T.C.L.	Incorporated by reference to Exhibit
	Industries Holdings (H.K.) Limited, dated June	10.10 to Form 10-K, filed February 18,
	28, 2003, as amended	2005
10.8	Debt agreement between GoVideo and Asia Focus	Incorporated by reference to Exhibit
	Industrial Ltd., dated June 12, 2003, as	10.11 to Form 10-K, filed February 18,
	amended	2005
10.9	Debt agreement between Opta and T.C.L.	Incorporated by reference to Exhibit
	Industries Holdings (H.K.) Limited, dated	10.12 to Form 10-K, filed February 18,
	October 21, 2003, as amended	2005
31.1	Certification of Principal Executive Officer	Filed herewith
	Pursuant to Section 302 of the Sarbanes-Oxley
	Act of 2002
31.2	Certification of Principal Financial Officer	Filed herewith
	Pursuant to Section 302 of the Sarbanes-Oxley
	Act of 2002
32.1	Certification Pursuant to Section 1350	Filed herewith
	Pursuant to Section 906 of the Sarbanes-Oxley
	Act of 2002

· Inventories. DigiTech’s inventory consists of mostly consumer electronics finished goods. Inventories are stated at the lower of cost or market with cost being determined on a first-in, first-out basis. We write down our inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of the inventory and the estimated market value based upon assumptions about future demand and market conditions. At of March 31, 2006, GoVideo had no inventory.

-· Impairment 27of other long-lived assets. Other long-lived assets, such as property and equipment, are amortized or depreciated over their estimated useful lives. These assets are reviewed for impairment whenever events or circumstances provide evidence that suggest that the carrying amount of the asset may not be recoverable, with impairment being based upon an evaluation of the identifiable undiscounted cash flows. If the asset has been impaired, the resulting charge reflects the excess of the asset’s carrying cost over its fair value.

~~SIGNATURE~~Recently Issued Accounting Standards

~~Pursuant~~In November 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”), Inventory Costs (“SFAS 151”), which revised Accounting Research Bulletin (“ARB”) 43, relating to inventory costs. This revision is to clarify the ~~requirements~~accounting for abnormal amounts of ~~the~~idle facility expense, freight, handling costs and wasted material ~~Securities~~(spoilage). ~~Exchange~~This ~~Act~~Statement requires that these items be recognized as a current period charge regardless of ~~1934,~~whether they meet the ~~Registrant~~criterion ~~has~~specified ~~duly~~in ~~caused~~ARB 43. In addition, this ~~report~~Statement requires the allocation of fixed production overheads to the costs of conversion be ~~signed~~ based on ~~its~~normal ~~behalf~~capacity byof the production ~~undersigned~~facilities. ~~thereunto~~We ~~duly~~adopted ~~authorized~~SFAS 151 during fiscal 2006. The adoption did not have a material effect on our financial position, results of operations, or cash flows as of or for the three and nine months ended March 31, 2006.

~~Date:~~In ~~May~~December 2004, the 20FASB issued SFAS 123R, ~~2005~~Share-Based ~~OPTA~~Payment (“SFAS ~~CORPORATION~~123R”), which is a revision of SFAS 123 and supersedes Accounting Principles Board Opinion 25, Accounting for Stock Issued to Employees (~~Registrant~~“APB 25”). ~~BY:~~Among ~~/S/~~other ~~YAN~~items, ~~Vincent~~SFAS 123R ~~Yong——————————————~~eliminates ~~YAN~~the use of APB 25 and the intrinsic value method of accounting, and ~~Vincent~~requires ~~YongPresident~~companies to recognize the cost of employee services received in exchange for awards of equity instruments, ~~Chief~~based ~~Executive~~on ~~Officer~~the grant date fair value of those awards, ~~Director~~in the financial statements. The effective date of SFAS 123R is the first reporting period beginning after June 15, 2005. SFAS 123R permits companies to adopt its requirements using either a “modified prospective” method, or a “modified retrospective” method. Under the “modified prospective” method, compensation cost is recognized in the financial statements beginning with the effective date, based on the requirements of SFAS 123R for all share-based payments granted after that date, and based on the requirements of SFAS 123 for all unvested awards granted prior to the effective date of SFAS 123R. Under the “modified retrospective” method, the requirements are the same as under the “modified prospective” method, but also permits entities to restate financial statements of previous periods based on proforma disclosures made in accordance with SFAS 123. We adopted this new standard on July 1, 2005, using the modified prospective method. Currently we do not have equity instruments that are impacted by the adoption of this standard. As a result, there was no impact to our consolidated financial position, results of operations or cash flows during the three and nine months ended March 31, 2006.

-On 28December 16, -2004, the FASB issued Statement 153, Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions (“SFAS 153”). SFAS 153 addresses the measurement of exchanges of nonmonetary assets and redefines the scope of transactions that should be measured based on the fair value of the assets exchanged. We adopted this new standard on July 1, 2005. During the three and nine months ended March 31, 2006, the Company had no such asset exchanges and therefore, this standard had no effect on its

financial position, results of operations or cash flows.

On June 7, 2005, the FASB issued Statement 154, Accounting Changes and Error Corrections (“SFAS 154”), a replacement of APB Opinion 20, Accounting Changes, and Statement 3, Reporting Accounting Changes in Interim Financial Statements. SFAS 154 changes the requirements for the accounting for and reporting of a change in accounting principle. Previously, most voluntary changes in accounting principles were required recognition via a cumulative effect adjustment within net income of the period of the change. SFAS 154 requires retrospective application to prior periods’ financial statements, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005; however, the Statement does not change the transition provisions of any existing accounting pronouncements. We do not believe adoption of SFAS 154 will have a material effect on our consolidated financial position, results of operations or cash flows.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants (“AICPA”), and the SEC did not or are not believed by management to have a material impact on the Company’s present or future financial statements.

Item 3 — Quantitative and Qualitative Disclosures About Market Risk:

Interest Risk. In the past, our exposure to market risk for changes in interest rates related primarily to the investment portfolio of our subsidiary, Correlant. Correlant’s entire investment portfolio was sold during the first quarter of fiscal 2006 as part of liquidating Correlant. As of March 31, 2006 we had no investments with exposure to changes in interest rates.

Foreign Currency Risk. The majority of our transactions are denominated in the U.S. dollar. However, with the shut down of GoVideo’s historical operations, our subsidiary, DigiTech, has become larger percentage of our operations. DigiTech’s transactions are denominated in the Chinese RMB. We do not have any hedging or similar foreign currency contracts. To date, we have not experienced any material foreign currency exchange rate gains or losses associated with foreign currency transactions and do not expect any significant changes in foreign currency exposure in the near future.

Item 4 — Controls and Procedures:

As previously reported, in connection with the audit of our financial statements for the year ended June 30, 2005, Clancy and Co., P.L.L.C. (“Clancy”), our independent auditors, informed the Board of Directors on February 20, 2006 of several “significant deficiencies” that collectively constituted a “material weakness” in our internal control over financial reporting under standards established by the Public Company Accounting Oversight Board.

A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the Company’s ability to initiate, authorize, record, process or report external financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Company’s annual or interim financial statements that is more than inconsequential will not be prevented or detected. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement or the annual or interim financial statements will not be prevented or detected.

The following conditions, all of which were communicated to the Audit Committee by Opta’s previous auditors (Hein & Associates LLP) and for which no apparent improvement was made, were identified:

· The current organization of the accounting department does not provide Opta with the adequate skills to accurately account for and disclose significant transactions or disclosures.

· Certain key managers in the accounting department do not appear to have the knowledge and experience required for their responsibilities.

· Substantive matters are not being addressed appropriately by the Board and Audit Committee resulting in inadequate oversight from the Board and Audit Committee.

· The process that Opta is currently using to monitor the ongoing quality of internal controls performance, identify deficiencies and trigger timely corrective action is not working effectively.

· There is no adequate means of accurately capturing and recording certain significant and complex business transactions.

Accordingly, the Company’s internal controls over financial reporting are still not effective.

Based upon the Company’s evaluation, which considered the above findings of Clancy, the Company’s management, including the Chief Executive Officer and the Chief Operating Officer, who is also the Interim Chief Financial Officer concluded that, as of March 31, 2006, the Company’s internal controls over financial reporting were not effective.

Evaluation of disclosure controls and procedures

The Company’s management evaluated, with the participation of the Chief Executive Officer and the Chief Operating Officer, who is also the Interim Chief Financial Officer, the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. As a result of

management’s evaluation, we identified a number of failures in the Company’s disclosure controls and procedures, which have impacted our ability to report our results of operations and financial condition accurately and in a timely manner. Based on this evaluation, the Company’s principal executive officer and principal financial officer have concluded that, as of such date, the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act) need to be strengthened and are not sufficiently effective. We have taken various steps to maintain the accuracy of our financial disclosures, and based on these measures and other significant work, management believes there are no material inaccuracies or omissions of material fact in our financial statements and other reports filed with the SEC. However, material weaknesses in our internal controls over financial reporting could further adversely impact our current inability to report timely financial information. Our efforts to strengthen our disclosure controls and procedures have been delayed due to the Going Private Transaction as described above in “Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The Going Private Transaction will enable us to terminate our Periodic Reporting Obligations so that we may continue future operations as a private company, relieving us of the costs, administrative burdens and competitive disadvantages associated with operating as a public company.

(b) Changes in internal control over financial reporting. There were no changes in our internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act rules 13a-15 or 15d-15 that occurred during the three months ended March 31, 2006 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. However, as a result of receiving notification of “significant deficiencies” that collectively constituted a “material weakness” from Clancy , we are currently in the process of taking a number of steps to improve the effectiveness of our internal control, as previously reported in our Annual Reports on Form 10-K for the years ended June 30, 2005 and 2004.

PART II. OTHER INFORMATION

Item 1 - Legal Proceedings

Please refer to the “Notes to Financial Statements Note 12 — Litigation” for a discussion of the Company’s legal proceedings.

Item 1A. Risk Factors

Please refer to the sections “Risks and Uncertainties” in Management’s Discussion and Analysis of Financial Condition and Results of Operations for a discussion of risk factors.

Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds

Recent Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities

None.

Item 3 - Defaults Upon Senior Securities

None

Item 4 - Submission of Matters to a Vote of Security Holders

None.

Item 5 - Other Information

None.

Item 6 — Exhibits

Exhibit Number	Description of Exhibit	Method of Filing
3.1	Certificate of Incorporation, as amended	Incorporated by reference to Exhibit 3.1 to Form 10-K, filed February 18, 2005
3.2	Amended and Restated Bylaws	Incorporated by reference to Exhibit 3.2 to Form 10, filed October 27, 1998
3.3	Amendment to Bylaws	Incorporated by reference to Exhibit 99.1 to Form 8-K, filed July 2, 2001
10.1	2000 Equity Incentive Plan	Incorporated by reference to Exhibit A to Proxy Statement on Schedule 14A filed April 4, 2000
10.2	Opta, Executive Employment Agreement	Incorporated by reference to Exhibit 10.11 to Form 10-K, filed October 15, 2001
10.3	Sale agreement of TCL Digital dated December 20, 2003	Incorporated by reference to Exhibit 10.9 to Form 10-K, filed April 16, 2004
10.4	Current Lease — GoVideo Office Lease	Incorporated by reference to Exhibit 10.10 to Form 10-K, filed April 16, 2004
10.5	Current Lease — GoVideo Lease for Commercial Space	Incorporated by reference to Exhibit 10.11 to Form 10-K, filed April 16, 2004
10.6	Current Lease — Opta Corporation Executive Office Lease, as amended	Incorporated by reference to Exhibit 10.6 to Form 10-K, filed March 14, 2006

Exhibit Number	Description of Exhibit	Method of Filing
10.7	Debt agreement between Opta and Wells Fargo Business Credit , Inc dated July 26, 2005, as amended	Incorporated by reference to Exhibit 10.7 to Form 10-K, filed March 14, 2006
10.8	Purchase and sale agreement among GoVideo, TCL Multimedia Technology Holdings Limited, TCL Industries (H.K.) Holdings Limited, Asia Focus Industrial Limited and Opta, dated July 26, 2005	Incorporated by reference to Exhibit 10.8 to Form 10-K, filed March 14, 2006
10.9	Intellectual Property Assignment between Opta Systems, LLC and TCL Multimedia Technology Holdings Limited, dated July 26, 2005	Incorporated by reference to Exhibit 10.9 to Form 10-K, filed March 14, 2006
10.10	Promissory note between Opta Systems, LLC and TCL Multimedia Technology Holdings Limited, dated July 26, 2005.	Incorporated by reference to Exhibit 10.10 to Form 10-K, filed March 14, 2006
10.11	Opta’s guarantee of GoVideo’s debt agreement with TCL Multimedia Technology Holdings Limited, dated July 26, 2005.	Incorporated by reference to Exhibit 10.11 to Form 10-K, filed March 14, 2006
10.12	Debt agreement between DigiTech and TCL dated April 19, 2005.	Incorporated by reference to Exhibit 10.12 to Form 10-K, filed March 14, 2006
10.13	Loan sale agreement between Opta and Wells Fargo Business Credit , Inc dated January 20, 2006	Incorporated by reference to Exhibit 10.13 to Form 10-K, filed March 14, 2006
10.14	Trademark license agreement between TCL Multimedia Technology Holdings Limited and Opta Systems LLC dated August 20, 2005	Incorporated by reference to Exhibit 10.14 to Form 10-Q for the three months ended September 30, 2005, filed April 28, 2006
10.15	Trademark license agreement between TCL Multimedia Technology Holdings Limited and Opta Corporation dated January 12, 2006	Incorporated by reference to Exhibit 10.15 to Form 10-Q for the three months ended September 30, 2005, filed April 28, 2006
31.1	Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
32.1	Certification of the Principal Executive Officer and Principal Financial Officer Pursuant to Section 1350 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith

SIGNATURE

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 thereunto duly authorized.

	OPTA CORPORATION (Registrant)

Date: June 22, 2006	By:	/s/ YAN, Vincent Yong
		YAN, Vincent Yong President, Chief Executive Officer, Director

Filing Compare · OPTA CORP