SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                 _______________
                                   FORM 10-KSB

       [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
           EXCHANGE ACT OF 1934

       [ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934

           For the fiscal year ended March 31, 2004

           Commission File No. 0-12817


                             PERFECTDATA CORPORATION
              (Exact name of Small Business Issuer in Its Charter)

                              California 95-3087593
                  (State or Other Jurisdiction of (IRS Employer
              Incorporation or Organization) Identification Number)

                          1445 East Los Angeles Avenue
                                    Suite 208
                          Simi Valley, California 93065
               (Address of Principal Executive Offices) (Zip Code)

                 Issuer's Telephone Number, Including Area Code:
                                 (805) 581-4000

          Securities registered pursuant to Section 12 (b) of the Act:
                                      None

          Securities registered pursuant to Section 12 (g) of the Act:
                                  Common Stock

Check  whether  the issuer  (1) has filed all  reports  required  to be filed by
Section 13 or 15 (d) of the  Securities  Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports),  and (2) has been subject to such filing  requirements for the past 90
days:

Yes[X] No[  ].

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B is not contained herein, and no disclosure will be contained,  to
the  best  of  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendments to this Form 10-KSB. [ ]

Issuer's  revenues  for its  most  recent  fiscal  year:  $2,680,000  (all  from
discontinued operations).

As of May 31,  2004,  the  aggregate  market  value of the voting  stock held by
nonaffiliates of the issuer was $4,382,150.

As of May 31, 2004, the issuer had 6,209,530  shares of Common Stock
outstanding.


<PAGE>

                                     PART I

Forward-Looking and Cautionary Statements.

         With the exception of historical information,  the matters discussed in
this Annual Report on Form 10-KSB  include  certain  forward-looking  statements
that involve risks and uncertainties,  including, without limitation, statements
regarding the Company's future financial  performance and the results or success
of  discussions  with other  entities  on  mergers,  acquisitions,  or  alliance
possibilities.  As a result,  actual  results may differ  materially  from those
described  in the  forward-looking  statement.  The  Company  cautions  that the
foregoing  list of  important  factors is not  exclusive.  The Company  does not
undertake to update any forward-looking statement in this Report.

Item 1.  Business.

General

         PerfectData  Corporation  (the "Company") was incorporated in the State
of  California  on June 8,  1976.  The  Company  was  originally  founded  by an
experienced  group of engineers and data processing  professionals to design and
manufacture a proprietary  line of magnetic media  maintenance  equipment - disk
pack  cleaners  and  inspectors.  This line of  equipment,  which has since been
discontinued,  was originally sold to Original  Equipment  Manufacturers  (OEMs)
such as Burroughs  Corporation (now Unisys Corporation),  DEC (Digital Equipment
Corporation),  NCR Corporation  and 3M  Corporation.  Sales of these products by
such well-known companies contributed to increased user awareness as to the need
for routine  computer care and maintenance.  It also brought  credibility to the
Company as a key manufacturer in the industry.

         With the evolution of the computer work  environment  from the sterile,
climate-controlled  surroundings  of a clean room to the  mainstream  office and
home environments,  simple preventative  maintenance has become a key element in
maintaining  equipment  efficiency  and  personal  productivity.  The  Company's
cleaning and  maintenance  products are designed to address the needs of the end
users  of  computers  and  office   automation   equipment  and  by  maintenance
organizations as part of preventative  maintenance  programs to reduce equipment
"down time" and service costs and to increase product life.

Proposed Sale of Current Business Operations

         On  October  3,  2003,  the  Company  entered  into an  Asset  Purchase
Agreement (the "APA") with Spray  Products  Corporation  ("Spray"),  pursuant to
which the company agreed to sell to Spray (or a Spray  affiliate)  substantially
all of the  operating  assets of the Company for a price equal to the sum of the
value of the inventory,  collectible accounts receivable and $100,000,  less the
amount of trade payables which are being assumed by Spray.


         Since November 1, 2003, Spray has,  pursuant to the APA, been acting as
a  manager  for the  fulfillment  of orders  from the  Company's  customers.  As
compensation  for Spray's  services,  Spray is  receiving a fee of 7 1/2% of net
sales.  As a result of the management  arrangement  with Spray,  the Company has
moved to a smaller facility and reduced its staff,  thereby reducing its ongoing
overhead  expenses.  As an example,  the Company  expects to save  approximately
$11,000 per month in rent and related facility costs.

         Because the Company's  largest  customer had threatened to seek another
supplier because of a supplier's offer of lower prices,  and because of the long
delay in closing the transaction,  thereby causing uncertainty for customers and
Spray, the Company and Spray have agreed in principle to the following revisions
to the APA: (1) effective  June 1, 2004,  Spray will assume full  responsibility
for all of the  Company's  customers  in order to  prevent  possible  losses  of
customer business; (2) the aforementioned payment of $100,000 will be reduced to
$80,000;  (3) based on the amounts of the items  constituting the purchase price
described  above and as  modified  in (2) as if the  closing was held on May 31,
2004, the Company will advise Spray of this  estimated  purchase price and Spray
will  promptly  advance to the  Company an amount in excess of what the  Company
owes Spray for product  purchased  from  Spray;  and (4) the Company may put the
assets to Spray for the purchase  price on the earlier of (a) September 30, 2004
or (b) the Company receiving shareholder consent to the sale to Spray.

<PAGE>                          2

         The  Board  of  Directors,   after   consultation  with  certain  major
shareholders, had elected in June 2003, to sell the operating business assets of
the Company  because,  despite  efforts by the Company  during the prior  fiscal
years which had increased sales and reduced  expenses,  the Company continues to
operate at a loss,  thereby  diluting  the  Company's  cash,  which is its major
asset.  The Board  concluded that a sale or liquidation of the operating  assets
was in the  best  interests  of the  company  and  its  shareholders  even if no
acquisition or merger (including the then pending transaction with SuperCom) was
effected.

         The Company will seek  shareholders'  approval,  by consents in lieu of
holding a meeting, to permit the sale of its operating assets to Spray.

         As a result of the  transaction,  as modified,  with Spray, the Company
will  have no  operations  and will  thereafter  receive  no  revenues  until an
acquisition or merger is effected.

The Industry

         The  Company's  products are sold in the computer and office  equipment
accessories  and supplies  market.  This market targets small,  medium and large
sized businesses as well as the home environment.

         This  market is  serviced  mainly by office  product  catalogs,  office
superstores, mass merchants, consumer electronics retailers, warehouse clubs and
computer  superstores.  PerfectData  has been  organized to service all of these
distribution channels.

Products

         Prior to November 1, 2003,  when  management of order  fulfillment  was
assumed by Spray, the Company had designed, assembled and/or packaged all of its
cleaning and maintenance products which it marketed and distributed. The Company
had  sub-contracted  for its components from a variety of established  suppliers
and manufacturers.

         The consumable cleaning and preventative  maintenance  products are for
home, office and computer environments. These products are designed to eliminate
or  minimize   contamination  in  and  around  computer  and  office  automation
equipment.  Use of the Company's  products on a regular basis reduces  equipment
downtime and the need for unnecessary service and repairs.

         The Company's principal selling product is the PerfectDuster  EcoDuster
line of  compressed  gas  dusters.  This  product  is  offered  in a variety  of
formulations  to meet  competitive  pressures  and  buyer  demand.  All of these
dusters are 100% CFC free and contain no ozone  depleting  chemicals  that could
damage the ozone layer in the earth's upper atmosphere.

         Other products that the Company  presently  sells are CD and tape drive
cleaners, CD player cleaners,  static control products, laser and inkjet printer
cleaners,  fax and copy machine cleaners, and a variety of premoistened cleaning
wipes for specific equipment.

Marketing

         Customers.  The Company's  products are sold  primarily  through retail
distribution   under  the   Company's   "PerfectData"   trademark.   The  retail
distribution  channel is comprised of office  product  catalogs,  office product
distributors  and  dealers,  stationery  and  computer  retail  stores and large
warehouse/superstore type accounts.

         While the  Company  sold  products  to more than 120  customers  in the
United States, Canada and other countries during the fiscal year ended March 31,
2004  ("fiscal  2004"),  approximately  94%  of the  Company's  net  sales  were
accounted for by its 10 largest customers.  Two customers  accounted for 71% and
13%,  respectively,  of total sales. Sales to these customers were made pursuant
to specific  purchase  orders and neither  customer is obligated to purchase the
Company's  products  under  any other  agreement.  The loss of either or both of
these customers could have an adverse effect on the Company's business. No other
customer accounted for more than 10% of the Company's net sales in fiscal 2004.

<PAGE>                          3

Sales Organization.

         Domestic  Sales.  Sales of  products  under  the  Company's  registered
trademark  "PerfectData" are made by independent  manufacturers'  representative
groups,  dealers  and large  distributors.  Sales of the  Company's  products to
Original Equipment  Manufacturers  under private label arrangements were handled
by Company sales  personnel  located in California  and, on a selected basis, by
certain assigned independent manufacturers' representatives.  Agreements between
the Company and manufacturers' representatives or distributors may be terminated
on short notice by either party.

         International Sales. Sales of the Company's products worldwide had been
handled  by  the  Company's  sales  personnel  located  in  California   through
international  distributors  and customers.  The Company has no agreements  with
foreign distributors.

         Customer  Service and Support.  In order to enhance  customer  service,
training,  field support and technical support,  the Company has a toll free 800
phone number.

         All  products  are sold with a "return to  manufacturer"  warranty  for
replacement  of damaged or defective  goods only.  Products are warranted for 90
days from the date of purchase. Dealers and distributors are required to perform
this  replacement  service on behalf of the Company.  All products  returned for
warranty  replacement must receive a written return  authorization  receipt from
the Company  prior to the return of any goods.  Costs  incurred  annually by the
Company for product warranties have been insignificant.

Competition

         The  Company   believes  that  neither  the  Company  nor  any  of  its
competitors has had a dominant position in the cleaning and maintenance  market.
There are many  competitors  in this  market and some of these  competitors  are
substantially  larger  in size and have  greater  financial  resources  than the
Company.

         The Company believes that the effectiveness,  quality,  service and the
price  competitiveness  of its products,  along with its  marketing  efforts and
programs, product selection and responsiveness to accounts' needs, have been the
principal basis on which it has competed in this market.

Materials and Supplies

         The nature of the raw  materials  used in the  Company's  products  are
various  chemicals,  metals,  plastics  and paper goods.  The Company  assembled
and/or  packaged its products in the United  States from  materials and supplies
purchased  primarily  from  domestic  vendors and  sub-contractors.  Some of the
assembled  component parts were  manufactured by vendors located in the Far East
because it was more cost effective to obtain goods and fabrication  expertise at
significantly  reduced  costs  when  compared  with  purchasing  the same  goods
domestically.

         The  Company  believes  that  its  established  relationships  with its
vendors and suppliers  are in good order.  The Company has not  experienced  any
significant  production  delays or loss of  revenue  due to the lack of parts or
material shortages.

         The Company, as a matter of standard business procedures, has regularly
reviewed its vendor  relationships  and has searched for new sources and ways to
produce its products both domestically and internationally  with the improvement
of quality, delivery or lowered cost of goods as its goals.

         The Company does not believe that federal,  state and local  provisions
which have been enacted or adopted regulating the discharge of material into the
environment,  or otherwise  relating to the protection of the environment,  have
had,  or will  have,  any  material  effect  on its  capital  expenditures,  its
potential earnings or its competitive position.

Employees

         At March 31,  2004,  the  Company  employed  4  persons,  of whom 1 was
engaged in customer service, and 3 in general management and administration.

<PAGE>                          4

         The Company  believes that its  relations  with its employees are good.
The  Company  has  never  had a work  stoppage  and  none of its  employees  are
represented by a labor union.

Terminated Acquisitions

         From  October  2001 to  February  2002,  the  Company  was  engaged  in
negotiations  pursuant to which the shareholders of GraphCo  Technologies,  Inc.
("GraphCo")  would acquire a majority  interest in, and control of the Board of,
the Company. GraphCo is a technologies, software and systems development company
providing  advanced  security  solutions  for biometric  identification,  secure
access,  surveillance  and  secure  law  enforcement  incident  management.  The
negotiations were mutually terminated on February 19, 2002.

         In August and September  2002, the Company was engaged in  negotiations
with another  privately-held  company,  with annual revenues  approximating $100
million,  pursuant to which the  stockholders  of that company  would  acquire a
majority  interest  in, and  control of the Board of, the  Company.  Just as the
parties  were  prepared  to execute a  definitive  merger  agreement,  the other
company   received  an  offer  from  another  very  large  public   company  and
negotiations were terminated during the weekend of September 20, 2002.

         On July 2, 2003,  the Company  entered  into an  Agreement  and Plan of
Merger and  Reorganization,  or the "Merger  Agreement," and related  agreements
with SuperCom,  an Israeli  corporation,  culminating the negotiations which had
begun in April  2003.  SuperCom  is engaged  in the  research,  development  and
marketing  of advanced  technologies  and  products  for  government  secured ID
projects  and smart card  production  technology.  Its common stock is currently
traded on the  Euronext  Brussels New Market.  On October 24, 2003,  the Company
filed  a  Registration   Statement  on  Form  S-4,  File  No.   333-109933  (the
"Registration  Statement"),  in order to make available a joint proxy  statement
for use by the Company and SuperCom to solicit approvals of the transaction from
their respective  shareholders and prospectus for the Company to offer shares of
the Common Stock to the SuperCom  shareholders if the proposed  transaction were
approved and consummated. If the transaction had been consummated,  the SuperCom
shareholders  would have received  approximately 78% of the outstanding  shares,
subject to adjustment upward depending on the Company's Final Net Available Cash
(as defined) at the  closing,  and three of the five  directors  would have been
designees of SuperCom. When it became obvious to both parties that, in order for
the Registration Statement to become effective,  SuperCom would at a minimum, be
required to include audited financial statements for its fiscal year which ended
December 31, 2003,  thereby  further  delaying  closing of the transaction as to
which negotiations had begun in April 2003 and which the parties initially hoped
to close by October 2003, the Merger Agreement was terminated after  discussions
as  to   alternatives.   From  the  perspective  of  the  Company's   directors,
continuation  of the  transaction  would  have  required  the  company  to incur
additional  expenses,  thereby  further  reducing  its Net  Available  Cash  and
resulting in further  dilution to its shareholders  absent SuperCom  agreeing to
change the dilution  formula,  and with no certainty as to when there would be a
closing.

Item 2.  Properties.

         The Company  leases  office space under a six-month  lease that expires
October 15, 2004. The Company  initially leased the office space for a six-month
term effective  October 15, 2003, and subsequently  for an additional  six-month
term. The Company had  previously  leased a 24,500 square foot facility under an
operating lease which expired June 20, 2003. The Company continued to occupy the
facility,  along with a subtenant to whom the company sublet warehouse space, on
a  month-to-month  basis until October 31, 2003.  As a result of the  management
arrangement with Spray, the Company moved to the smaller facility.

Item 3.  Legal Proceedings.

         As of March 31, 2004, there were no material pending legal  proceedings
to  which  the  Company  was a party  or of which  any of its  property  was the
subject.

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

         None.


<PAGE>                          5

                                     PART II

Item 5.  Market for the Registrant's Common Equity and Related
         Stockholder Matters.

Market Information

         The Common  Stock of the  Company is listed on the OTC  Bulletin  Board
under the symbol PERF.  Prior to April 17, 2003,  the Common Stock was traded on
the Nasdaq SmallCap Market. The following table sets forth the range of high and
low sales  prices per share of the Common  Stock for the  indicated  quarters of
fiscal 2004 and the fiscal year ended March 31, 2003 ("fiscal 2003").
<TABLE>
<S>     <C>                                                  <C>                <C>

                                                                        Sales Price
                                                                High                    Low

                  2004
         First Quarter                                        $   1.29          $   .25
         Second Quarter                                       $   1.35          $   .95
         Third Quarter                                        $   1.24          $   .85
         Fourth Quarter                                       $   1.10          $   .46


                  2003
         First Quarter                                        $   1.65          $   .69
         Second Quarter                                       $   1.70          $   .69
         Third Quarter                                        $   1.00          $   .55
         Fourth Quarter                                       $    .84          $   .50

</TABLE>

Holders

         The  approximate  number of  shareholders  at March 31,  2004 was 1,700
determined by security position listings.

Dividends

         Because of its losses  from  operations,  the  Company has not paid any
cash dividends on the Common Stock and, until  profitability is restored,  as to
which and when there can be no assurance, the Company does not intend to pay any
cash dividends.

Unregistered Securities Sales

         There were no sales by the Company of shares of the Common Stock during
the fourth quarter of fiscal 2004, whether or not the shares were registered for
sale by the Company  under the  Securities  Act of 1933,  as  amended.  The sole
issuance  of any  shares  during  fiscal  2004 was  previously  reported  in the
Company's  Quarterly  Report on Form 10-QSB for the quarter ended  September 30,
2003.

Item 6.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations.

Proposed Sale of Current Business Operations

         As previously reported, on October 3, 2003, the Company entered into an
Asset Purchase Agreement (the "APA") with Spray Products Corporation  ("Spray"),
pursuant  to which the  Company  agreed to sell to Spray (or a Spray  affiliate)
substantially  all of the  operating  assets of the Company for a price equal to
the sum of the  value of the  inventory,  collectible  accounts  receivable  and
$100,000, less the amount of trade payables which are being assumed by Spray.

<PAGE>                          6


         Since November 1, 2003, Spray has,  pursuant to the APA, been acting as
a  manager  for the  fulfillment  of orders  from the  Company's  customers.  As
compensation  for Spray's  services,  Spray is  receiving a fee of 7 1/2% of net
sales.  As a result of the management  arrangement  with Spray,  the Company has
moved to a smaller facility and reduced its staff,  thereby reducing its ongoing
overhead expenses.

         Because the Company's  largest  customer had threatened to seek another
supplier because of a supplier's offer of lower prices,  and because of the long
delay in closing the transaction,  thereby causing uncertainty for customers and
Spray, the Company and Spray have agreed in principle to the following revisions
to the APA: (1) effective  June 1, 2004,  Spray will assume full  responsibility
for all of the  Company's  customers  in order to  prevent  possible  losses  of
customer business; (2) the aforementioned payment of $100,000 will be reduced to
$80,000;  (3) based on the amounts of the items  constituting the purchase price
described  above and as  modified  in (2) as if the  closing was held on May 31,
2004, the Company will advise Spray of this  estimated  purchase price and Spray
will  promptly  advance to the  Company an amount in excess of what the  Company
owes Spray for product  purchased  from  Spray;  and (4) the Company may put the
assets to Spray for the purchase  price on the earlier of (a) September 30, 2004
or (b) the Company receiving shareholder consent to the sale of Spray

         The  Board  of  Directors,   after   consultation  with  certain  major
shareholders, had elected in June 2003, to sell the operating business assets of
the Company  because,  despite  efforts by the Company  during the prior  fiscal
years which had increased sales and reduced  expenses,  the Company continues to
operate at a loss,  thereby  diluting  the  Company's  cash,  which is its major
asset.  The Board  concluded that a sale or liquidation of the operating  assets
was in the  best  interests  of the  company  and  its  shareholders  even if no
acquisition or merger (including the then pending transaction with SuperCom) was
effected.

         The Company will seek  shareholders'  approval,  by consents in lieu of
holding a meeting, to permit the sale of its operating assets to Spray.

         As a result of the  transaction,  as modified,  with Spray, the Company
will  have no  operations  and will  thereafter  receive  no  revenues  until an
acquisition  or  merger  is  effected,  as to  which  and when  there  can be no
assurance.

Efforts to Seek Another Merger or Acquisition Candidates

         As previously  reported,  on July 2, 2003, the Company entered into the
Merger Agreement and related agreements with SuperCom,  an Israeli  corporation,
culminating the negotiations which had begun in April 2003.  SuperCom is engaged
in the research, development and marketing of advanced technologies and products
for  government  secured ID projects and smart card  production  technology.  On
January 20, 2004,  the Company  reported  that the Merger  Agreement and related
agreements had terminated.

         The Board of Directors of the Company does not intend to liquidate  the
Company but instead,  with the Company having cash or cash equivalents currently
in excess of $1,500,000, the Board intends to continue its search for a suitable
merger  or  acquisition  candidate.   Even  though  the  Company  will  have  no
operations,  the Company  believes  its status as a  publicly-traded  company is
valuable and therefore makes it a viable merger candidate. During the past three
fiscal  years,  the Company had been  seeking  acquisitions  which have not been
related to its current business. The Board was of the opinion that profitability
on a  continuous  basis would not be  achieved  absent an  acquisition  of a new
business or businesses and/or new products. However, the Board can not determine
when any such acquisition  will be consummated,  if at all. During recent years,
three  potential  acquisitions   (including  SuperCom)  were  actively  pursued;
however,  all terminated for different reasons and the Company incurred expenses
in connection therewith.

Critical Accounting Policies

         Management  believes  that  the  following   discussion  addresses  the
Company's  most  critical  accounting  policy,  which is most  important  to the
portrayal of the Company's  financial  condition  and results,  and requires the
most difficult,  subjective and complex judgments, often as a result of the need
to make  estimates  about the effect of matters that are  inherently  uncertain.
Prior to November 1, 2003,  the date on which Spray assumed  responsibility  for
fulfillment  of customer  orders,  management  also included a discussion of its
evaluation of inventory as a critical accounting policy on an on-going basis.

<PAGE>                          7


Allowance for Doubtful Accounts:

         The Company evaluates the collectibility of its accounts receivable and
provides an  allowance  for  estimated  losses  that may result from  customers'
inability to pay.  The amount of the reserve is  determined  by analyzing  known
uncollectible  accounts,  aged  receivables  and  customers'  credit-worthiness.
Amounts later  determined and specifically  identified to be  uncollectible  are
written off against the allowance.

___________

         The following  discussions  of the Results of Operations  and Liquidity
and Capital  Resources are before the  restatement  of the  Company's  financial
statements for the proposed sale of the current business operations.

Results of Operations

         Net sales in fiscal 2004 increased $675,000, or 34%, to $2,680,000 from
net sales of $2,005,000 in fiscal 2003. The increased  sales in fiscal 2004 were
a result of an increase in sales  volume with the Compan's  existing  customers.
Spray's management of the fulfillment of orders from the Company's customers, as
described under the caption  "Proposed Sale of Current  Business  Operations" in
this Item 6, had no effect on the  increased  sales in fiscal 2004.  All the net
sales in fiscal 2004 and 2003 related to discontinued operations.

         Cost of Goods Sold  ("Costs") as a percentage  of net sales was 66% for
fiscal 2004 and 2003, respectively.  Even though the Company incurred additional
costs in fiscal 2004  related to the  interim  management  fee for Spray,  these
costs were offset by the reduction in overhead expenses when the Company reduced
its staff,  as well as the savings in freight  expense  when orders were shipped
directly from Spray to the Company's customers. All the Costs in fiscal 2004 and
2003 related to discontinued operations.

         Selling,  General and Administrative  Expenses  ("Expenses") for fiscal
2004 and 2003 were  $1,477,000  and  $1,358,000,  respectively.  The increase in
Expenses in fiscal 2004 directly  related to costs  associated with the SuperCom
transaction,  as well as severance pay and related taxes paid to employees whose
employment was terminated when the Company  transferred its order fulfillment to
Spray.  These costs were  partially  offset by a reduction in facility  expenses
when the  Company  transferred  its  order  fulfillment  to Spray and moved to a
smaller facility.  An aggregate of $226,000 in Expenses relating to the SuperCom
transaction  were  incurred  in fiscal  2004 and an  aggregate  of  $115,000  in
Expenses  relating to an aborted  transaction  were incurred in fiscal 2003. See
"Terminated  Acquisitions" under Item 1, Part I to this Report. In addition, the
Company recorded  compensation  expense of $51,500 in fiscal 2004 related to the
50,000 shares of the  Company's  Common Stock issued to the then Chairman of the
Audit  Committee for his services as such.  Included in Expenses for fiscal 2004
and 2003 were  components  related to  discontinued  operations  of $544,000 and
$690,000, respectively.

         Other Income from  continuing  operations  for fiscal 2004 and 2003 was
primarily dividend income of $17,000 and $37,000, respectively.

         The decreased net loss in fiscal 2004 directly related to the increased
sales partially offset by the increase in Expenses, as described above.

Liquidity and Capital Resources

         The Company's cash and cash  equivalents  decreased  $270,000 in fiscal
2004. The decrease resulted from cash used in continuing operating activities of
$743,000, partially offset by cash provided by discontinued operating activities
of $473,000.

         The Company had a current ratio of better than 4 to1 at fiscal year end
and no long-term debt.

         As a result of the continuing negative cash flows from operations,  the
Company is dependent on the  proceeds  from its March 2000 private  placement in
order to meet its payable  requirements.  On March 31, 2000,  certain  investors
(including two of the current directors) purchased from the Company an aggregate
of  1,333,333  shares of the  Common  Stock at $2.25  per share or an  aggregate
purchase price of $2,999,999. The net proceeds

<PAGE>                          8


         approximated to $2,895,000. Because all of such funds were not required
for  operations,  the funds  deemed  excess were  invested in a working  capital
management  account  with Merrill  Lynch,  Pierce,  Fenner & Smith  Incorporated
("Merrill  Lynch").  As reported in Note 3 to the  Financial  Statements in this
Report, as of March 31, 2004, the Company had  approximately  $1,903,000 of cash
equivalents  in two  financial  institutions,  which  exposes  the  Company to a
concentration  of credit risk.  The Company had, as of that date,  approximately
$1,896,000  invested in highly  liquid  money  market  instruments  with Merrill
Lynch, which are not federally insured.  The remaining $7,000 was deposited at a
bank, which is federally insured up to $100,000.

         The Company  believes  that,  as a result of the cash  described in the
preceding  paragraph and assuming  consummation of the proposed sale of business
operations  to Spray,  the  Company's  working  capital is  adequate to fund its
operations  and its  requirements  for the fiscal  year  ending  March 31,  2005
("fiscal  2005").  In the event,  which in the opinion of  management  is deemed
unlikely, that the sale to Spray is not consummated, the Board believes that the
Company  would either  continue to operate the business for a short period while
seeking  another  buyer or, more likely would  liquidate  its  operations  in an
orderly  fashion.  In either event, the Company believes it has adequate working
capital to continue to operate for fiscal 2005 while  seeking a suitable  merger
and acquisition candidate.

At March 31,  2004,  the  Company  had net  operating  loss and general
business  tax credit carry  forwards  for income tax  purposes of  approximately
$5,453,000 and $12,000 respectively,  available to reduce future potential
Federal income taxes.

Item 7.  Financial Statements.

         The  information  required  by this  Item  is  incorporated  herein  by
reference  to the  financial  statements  listed  in Item 13 of Part III of this
Report.

Item 8.  Changes in and Disagreements on Accounting and Financial Disclosure.

         See Item  13(b) of this  Report  for  information  as to the  Forms 8-K
reporting the change in accountants.

Item 8A.   Controls and Procedures

Evaluation of Disclosure Controls and Procedures

         The Company has a CEO and a CFO/CAO,  constituting  all of  management,
and, during the reporting period, six employees to conduct  operations.  The CEO
and CFO/CAO  performed  an  evaluation  of the  effectiveness  of the design and
operation of the Company's  disclosure  controls and  procedures as of March 31,
2004.  Because of its small size and limited  number of  personnel,  the Company
does not  currently  have  elaborate  written  procedures,  nor does  management
believe that such elaborate written procedures are currently necessary to ensure
accurate  reporting  in  the  Company's   periodic  reports.   In  making  their
evaluation,  the CEO and CFO/CAO  consulted with the Company's  outside counsel.
Based  on that  evaluation,  the  two  officers  concluded  that  the  Company's
disclosure controls and procedures were adequate and effective,  as of March 31,
2004 to ensure that material  information  relating to the Company would be made
known to them by others  within the Company,  particularly  during the period in
which this Report was being prepared. Their evaluation was reported to the Audit
Committee in connection with its review of this Report prior to its filing.

Changes in Internal Controls

         There  have  been no  significant  changes  in the  Company's  internal
controls or in other factors that could  significantly  affect internal controls
since the date of their evaluation in the fourth quarter.

<PAGE>                          9


                                    PART III

Item 9.     Directors and Executive Officers.

Directors and Executive Officers

         The following table contains  certain  information  relating to the
directors and executive  officers of the Company as of May 1, 2004:


Name                                Age              Position

Harris A. Shapiro                   68               Chief Executive Officer,
                                                     Director and Chairman of
                                                     the Board

Bryan Maizlish                      42               Director

Timothy D. Morgan                   49               Director

Tracie Savage                       41               Director

Corey P. Schlossmann                49               Director

Irene J. Marino                     59               Vice President Finance,
                                                     Chief Financial Officer
                                                     and Corporate Secretary


Business History

         Harris A.  Shapiro  was elected as a director  of  PerfectData  and its
Chairman of the Board on March 31, 2000. On September 7, 2000, he was designated
Chief Executive  Officer of  PerfectData.  Mr. Shapiro has been the President of
Millennium  Capital  Corporation,  a consulting firm specializing in mergers and
acquisitions,  since 1994.  He was Senior Vice  President  Corporate  Finance of
Gilford Securities  Incorporated,  a registered  broker-dealer,  from January 1,
1999 to March 29, 2000. Prior to Gilford Securities,  he was a Managing Director
of Whale Securities Co., L.P., a registered broker-dealer,  from June 1993 until
December 1998.

         Bryan  Maizlish was elected as a director of  PerfectData  on March 31,
2000. Mr. Maizlish  joined  Lockheed  Martin  Corporation in August 2000 and has
held various  managerial  positions  since then. He is currently  serving as the
Chief  Technology  Officer/IT  Program  Director of the Integerated  Systems and
Solutions Team NSGI of Lockheed Martin Corporation.  From January 1998 to August
2000,  he  was  employed  by  Magnet   Interactive   Inc.,  a  private  Internet
professional  services company and its affiliate Noor Group Ltd., a full service
Internet solutions and infrastructure provider offering a full range of services
from networking,  hosting,  and Internet service provision to web-based services
and  entertainment  based in Cairo,  Egypt,  his last position at both companies
being  Executive  Vice  President,  Chief Strategy  Officer and Chief  Financial
Officer.  Prior thereto, he held various managerial and consulting positions for
over a decade in the new media and entertainment  industries,  such as MCA Inc.,
Gulf Western Corporation and Gene Roddenberry's Norway Corporation.

         Timothy D. Morgan was elected as a director of PerfectData on March 31,
2000.  He has,  since  October  1997,  been a consultant  on matters of business
strategies,  taxation,  finance and asset protection  techniques,  and providing
interim Chief Financial Officer and Controller  services.  None of the foregoing
services or any of those hereafter described were provided to PerfectData.  From
1980  through  October  1997,  he was a  principal  of Abacus Tax and  Financial
Services, a firm specializing in tax compliance and pension plan administration.
Prior to 1982, Mr. Morgan was manager of purchasing  and accounting  departments
for various companies, including Dennison Eastman Corporation,  Syntel Cavitron,
Incorporated, and Contempo Casuals, Incorporated.

         Tracie  Savage was elected in July 1995 as a director  of  PerfectData.
Ms.  Savage has been the main news  anchor for KFWB Radio in Los  Angeles  since
August 2001. From April 2001 to July 2001, Ms. Savage worked for the Los Angeles
television  subsidiary of the National  Broadcasting Company, Inc. ("NBC"). From
March 1994 to March 2001, Ms. Savage was the co-anchor of NBC Channel 4's "Today
in L.A.: Weekend".  From 1991 to 1994,

<PAGE>                          10

she was a general  assignment  reporter for the independent Los Angeles station,
KCAL. Ms. Savage has been in broadcast journalism for more than 16 years and has
been the recipient of numerous awards and honors in her field.

         Corey P.  Schlossmann was elected as a director of PerfectData on March
31, 2000. Mr.  Schlossmann has been Chief Executive  Officer since October 1999,
and Chief Financial  Officer since January 1999, of Nationwide  Auction Systems.
Since  January  1996,  he has also  served as a partner  of  Gordon,  Fishburn &
Schlossmann,  a management consulting and accounting firm. Mr. Schlossmann was a
partner of Hankin & Co., a consulting firm, from 1988 until 1995.

         Irene  J.  Marino  originally  joined  PerfectData  in  March  1982 and
rejoined  PerfectData  in  September  1987 after a leave of  approximately  four
months.  Ms.  Marino was  promoted to Manager of Finance and  Administration  in
March  1983 and to  Controller  and  Assistant  Secretary  in March  1986.  Upon
rejoining  PerfectData  in September  1987,  Ms. Marino  assumed the position of
Controller,  Chief  Financial  Officer and  Secretary  of  PerfectData.  She was
appointed  Vice President of Finance in August 1989, and has more than 35 years'
experience in finance, accounting and administration.

Other Directorships

         Since October 1999,  Corey P.  Schlossmann  has served as a director of
Entrade,   Inc.,  a  New  York  Stock  Exchange  holding  company  whose  online
subsidiaries  (including  Nationwide Auction Systems of which he is an executive
officer as  indicated  in the  preceding  section  "Business  History")  provide
auction  and  asset  disposition  services  to  the  utility  and  manufacturing
industries, among others.

         No other director of the Company serves as a director of a company with
a class of  securities  registered  pursuant  to  Section  12 of the  Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any company registered
as an investment company under the Investment Company Act of 1940, as amended.

Compliance with Section 16(a) of the Exchange Act

         Based  solely on a review  of Forms 3 and 4  furnished  to the  Company
under Rule 16a-3(e)  promulgated  under the Exchange Act, with respect to fiscal
2004,  the  Company is not aware of any  director  or  executive  officer of the
Company  who  failed to file on a timely  basis,  as  disclosed  in such  forms,
reports required by Section 16(a) of the Exchange Act during fiscal 2004, except
for Corey P.  Schlossmann  who failed to report timely on Form 4 one transaction
on the last day of fiscal 2004 relating to a gift by him of 75,000 shares of the
Common Stock to an unaffiliated trustee for his children.

         As of March 31,  2004,  i.e.,  the end of fiscal  2004,  there  were no
beneficial  owners of 10% or more of the Common Stock known to the Company other
than  Joseph  Mazin  who was,  until  July 27,  2000,  the  President  and Chief
Executive  Officer of the Company  and,  until March 31, 2000, a director of the
company.  Mr.  Mazin has advised the  Company  that he timely  filed all reports
required by Section 16(a) of the Exchange Act during fiscal 2004.

Code of Ethics

         The Board of  Directors  of the Company has  determined  not to adopt a
written code of ethics because the Company (1) has only two executive  officers,
(2) has  agreed to sell the  Company's  current  operations  to an  unaffiliated
company which has,  since  November 1, 2003,  been acting as the manager for the
fulfillment  of orders from the  Company's  customers  and (3) has been actively
seeking a suitable  acquisition or merger  partner for the Company.  Instead the
Board had counsel to the  Company  review with the two  officers  the  standards
which  would  have  been in a  written  code of ethics  and  directed  its Audit
Committee  to monitor  closely  the  conduct of the two  officers  on at least a
quarterly basis.

<PAGE>                          11

Item 10. Executive Compensation.

Summary Compensation Table

         The following table provides certain summary information concerning the
compensation  earned for  services  rendered  in all  capacities  to the Company
during each of the last three  fiscal  years by the  Company's  Chief  Executive
Officer as of the end of the last fiscal year. No other executive officer of the
Company earned in excess of $100,000:

<TABLE>
                                                      SUMMARY COMPENSATION TABLE
<S>                             <C>                         <C>                             <C>

                               Annual Compensation          Long-Term Compensation          Other Compensation
Name and                                                    Securities Underlying                    ($)
Principal Position                  Year     Salary                    Options
                                             ($)

Harris A. Shapiro (1)               2004    150,000                          -                     2,500  (2)
Chief Executive Officer and         2003    150,000                     35,000                     2,250  (2)
Chairman of the Board               2002    118,125                        -                       1,750  (2)
</TABLE>

(1)  The Board  designated  Mr.  Shapiro as the Chief  Executive  Officer of the
     Company effective  September 2000. The Company and Mr. Shapiro entered into
     a one-year  employment  agreement in September  2000  providing  for a base
     annual salary of $150,000.  The Board had, from time to time,  extended the
     term of his contract at the same salary. Effective April 1, 2004, the Board
     amended his  contract  (a) to a base  annual  salary of $95,000 and (b) the
     contract is terminable upon two weeks' prior notice by either party.

(2)  Mr. Shapiro was paid cash compensation for his services as a director.

Option /SAR Grants in Last Fiscal Year

(1)      2000 Option Plan

         In May 2000,  the Board of Directors  of the Company  adopted the Stock
Option Plan of 2000 (the "2000 Option Plan").  In October 2000, the shareholders
of the Company  approved  the 2000 Option Plan and ratified  options  previously
granted.  The Company  registered  under the Securities Act the shares  issuable
upon the  exercise  of options  granted or to be  granted  pursuant  to the 2000
Option Plan in a Registration  Statement on Form S-8 filed on December 13, 2000.
As a result of such filing,  optionees who are not affiliates of the Company may
resell the shares of the Common Stock received upon exercise immediately,  while
affiliates will require a "re-offer prospectus" to resell or wait one year after
exercise to resell  pursuant to the  exemption of Rule 144 under the  Securities
Act. The Company has not as yet filed such re-offer prospectus.  The 2000 Option
Plan provides for the grant of options to purchase shares of the Common Stock to
directors,  officers,  employees and  consultants of the Company.  Non-qualified
stock options may be granted to directors,  officers, employees and consultants.
Incentive stock options,  as such form is defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), may be granted only to employees.
The term of the 2000 Option Plan is for ten years and it provides for the grants
of an aggregate of 2,000,000 shares of the Common Stock. The 2000 Option Plan is
currently administered by the Board.

         The 2000  Option  Plan,  consistent  with the  provisions  of the Code,
provides that the exercise price of an incentive  stock option shall not be less
than the fair  market  value of the  Common  Stock on the date of grant,  except
that, if the employee owns stock  possessing more than 10% of the total combined
voting power of all classes of stock,  the exercise  price of the option must be
at least 110% of the fair market  value of the Common Stock on the date of grant
and the  incentive  stock option  cannot be exercised  after five years from the
date of grant.  No stock option  granted has, and no option to be granted  under
the 2000 Option Plan may have, a term in excess of ten years. The exercise price
of a non-statutory or nonqualified option may be less than the fair market value
on the date of grant.

<PAGE>                          12

         The number of shares subject to an outstanding  option and the exercise
price thereof are subject to adjustment in the event of a stock dividend,  stock
split,  reorganization,  recapitalization,  combination  of  shares,  change  in
corporate  structure or similar events. No fractional shares will be issued upon
exercise and the Company has no obligation to pay for such fractional share.

         Options granted to date are not exercisable during the first year after
the date of grant and thereafter  become  exercisable in annual  installments of
25% each.  It is expected  that  future  options,  if any,  will be granted on a
similar  basis.  Some  options to be granted to employees  may have  performance
goals as the condition precedent to becoming exercisable.

         Options granted under the 2000 Option Plan are non-transferable and not
immediately  exercisable.  Future options, if any, are expected to be granted on
the same basis.

         If the optionee's  employment  will terminate for any reason other than
his or her  death  or  disability,  he or she may,  for a period  of up to three
months,  exercise  the  option  to the  extent  exercisable  upon  the  date  of
termination.  If the optionee's  employment will terminate because of his or her
total and permanent  disability (as defined in the Code), the optionee will have
12 months to exercise the stock option to the extent  exercisable  upon the date
of  termination.  In the  event of other  disability  causing  termination,  the
optionee  may have six  months  (three  months in the event the  optionee  wants
continuous  treatment  of the stock  option as an  incentive  stock  option)  to
exercise  the  stock  option  to  the  extent   exercisable  upon  the  date  of
termination.  If the optionee  dies, his estate may exercise the stock option to
the  extent  exercisable  upon the date of death  of the  optionee,  whether  it
occurred  during the initial term or during the three,  six or 12-month  periods
described in the three  preceding  sentences.  In no event may a stock option be
exercised  beyond its  original  expiration  date.  Similar  provisions  will be
applicable to optionees who are not employees.

         For a  consultant  to be eligible to receive a grant of a stock  option
under the 2000  Option  Plan,  the  optionee  must be a natural  person  and the
services  rendered  for the  Company  must be of a bona fide  nature  and not in
connection  with the offer or sale of  securities  of the  Company  in a capital
raising  transaction  and do not  directly or  indirectly  promote or maintain a
market for the Company's securities.

         At March 31, 2004,  options  covering a total of 183,500  shares of the
Common Stock were  outstanding  under the 2000 Option Plan at a weighted average
exercise price of $1.28 per share.

(2)      Activity in Fiscal 2004

         No stock options were granted to the Company's Chief Executive  Officer
who is the sole executive officer named in the Summary Compensation Table during
fiscal 2004.

         The Company has never granted any stock appreciation rights (SARs).

Option Exercises and Values

         The following table provides certain summary information concerning the
exercise of options during fiscal 2004 and unexercisable  options held as of the
end of fiscal  2004 by the Chief  Executive  Officer  who is the sole  executive
officer named in the Summary Compensation Table:

<TABLE>
                                            AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                                                   AND FISCAL YEAR END OPTION VALUES
<S>                        <C>               <C>              <C>                        <C>

                           Shares                             Number of                 Value of
                           Acquired                           Unexercised               Unexercised In-the-
                             On             Value             Options Held at           Money Options
Name                       Exercise         Realized          Fiscal Year End           at FY-End
                             (#)                ($)                 (#)                      ($)

Harris A. Shapiro              -                 -            35,000 (1)                      - (2)
</TABLE>

<PAGE>                          13


(1)      As of March 31, 2004, options were exercisable to purchase 11,666
         shares.

(2)      Such  value is based upon the  market  value of the Common  Stock as of
         March 31, 2004,  less the exercise  price  payable per share under such
         options.  As of March  31,  2004,  the  market  value was less than the
         exercise price.

Directors' Compensation

         Each director is paid $250.00 for telephonic  participation and $500.00
for attendance in person at a meeting of the Board.

         Directors  may be  granted  stock  options  as  compensation  for their
services.  During  fiscal 2004,  no new options were granted to directors of the
Company.

         There are no other  relationships  with respect to other  entities that
would require disclosure here under Item 404 of Regulation S-K.

Item 11. Security Ownership of Certain Beneficial Owners
         and Management and Related Stockholder Matters.

Security Ownership

         The following table sets forth, as of May 31, 2004, certain information
with respect to all shareholders known by the Company to be beneficial owners of
more than 5% of its outstanding  shares of the Common Stock, the Chief Executive
Officer of the Company  (being the sole  executive  officer named in the Summary
Compensation  Table in Item 10 to this  Report),  all directors and all officers
and directors of the Company as a group. The ownership information was furnished
to the Company by the person or entity.

<TABLE>
<S>                                     <C>                                     <C>

                                         Number of Shares                       Percentage of
Name and Address                         of Common Stock                        Common Stock
of Beneficial Owner                      Beneficially Owned                     Beneficially Owned (1)

Joseph Mazin                                788,997 (2)                                 12.71
c/o Flamemaster Corporation
11120 Sherman Way
Sun Valley, CA  91252

StarBiz Corporation                         537,997 (2)                                 8.66
11120 Sherman Way
Sun Valley, CA  91252

William B. Wachtel,                         427,873                                     6.89
Trustee of Digital Trust (3)
c/o Wachtel & Masyr, LLP
110 East 59th Street
New York, NY 10022

Harris A. Shapiro (4)                       309,499 (5)                                 4.96
c/o PerfectData Corporation
1445 East Los Angeles Avenue
Simi Valley, CA 93065

Bryan Maizlish (6)                           19,255 (7)                               less than 1%
9705 Conestoga Way
Potomac, MD 20854

</TABLE>


<PAGE>                          14
<TABLE>

<S>                                     <C>                                     <C>


                                         Number of Shares                       Percentage of
Name and Address                         of Common Stock                        Common Stock
of Beneficial Owner                      Beneficially Owned                     Beneficially Owned (1)

Timothy D. Morgan (6)                        20,455 (7)                               less than 1%
11734 Gladstone Circle
Fountain Valley, CA 92708

Tracie Savage (6)                            29,555 (8)                               less than 1%
6212 Banner Avenue
Los Angeles, CA  90038

Corey P. Schlossmann (6)                     44,758 (7)                                 7.14
19654-A Roscoe Blvd.
Northridge, CA 91324

All directors and officers as a group       828,088 (9)                                13.13
(6 in number)
</TABLE>
(1)      The percentages  computed in the table are based upon 6,209,530  shares
         of the Common Stock which were  outstanding on May 31, 2004.  Effect is
         given,  pursuant to Rule  13-d(1)(i)  under the Exchange Act, to shares
         issuable upon the exercise of options or warrants currently exercisable
         or exercisable within 60 days of May 31, 2004.

(2)      The  shares of the  Common  Stock  reported  in the table  include  (a)
         537,997 shares owned by StarBiz  Corporation,  or "StarBiz",  for which
         Mr.  Mazin  has  voting  power as the  President,  Chairman  and  Chief
         Executive   Officer  of  StarBiz;   (b)  36,000  shares  owned  by  the
         Flamemaster  Corporation  Employees'  Profit Sharing Plan for which Mr.
         Mazin  is  the  fiduciary;  and  (c)  23,000  shares  owned  by  Altius
         Investment Corporation ("Altius") for which Mr. Mazin has shared voting
         power  as  Chairman  of the  Board of  Altius.  Certain  of the  shares
         reported  in the  table are owned by Donna  Mazin,  his wife,  or as to
         which shares she shares dispositive and voting powers with Mr. Mazin.

(3)      William B. Wachtel as the Trustee of the Digital  Trust has,  under the
         trust  agreement,  sole voting and investment power with respect to the
         shares reported in the table. Harris A. Shapiro, currently the Chairman
         of the Board,  Chief  Executive  Officer and a director of the Company,
         was the settler of the Digital Trust and made an  irrevocable  grant to
         it of the assets which the Digital Trust used to effect the purchase of
         the shares.  The  beneficiaries  of the Digital Trust are Mr. Shapiro's
         children and grandchildren  who survive him,  although the Trustee,  in
         his  absolute  discretion,  may  pay  or  apply  yearly  income  or the
         principal  of  the  Trust  to  any  beneficiary.  Because  he  made  an
         irrevocable grant and has no voting or investment power with respect to
         the  shares,  Mr.  Shapiro  is not the  beneficial  owner of the shares
         reported in the table as being owned of record by the Digital Trust and
         beneficially by the Trustee.

(4)      Mr. Shapiro is the Chairman of the Board, the Chief Executive Officer
         and a director of the Company.

(5)      The  shares of the  Common  Stock  reported  in the table  reflect  (a)
         284,500   shares   owned  by   Millennium   Capital   Corporation,   or
         "Millennium,"  for which Mr. Shapiro has voting power as its President;
         (b) 6,666 shares  issuable upon the exercise of an option expiring June
         19, 2012 under the  Company's  2000 Stock Option Plan (the "2000 Option
         Plan");  (c)  8,333  shares  issuable  upon the  exercise  of an option
         expiring  September 25, 2012 under the 2000 Option Plan; and (d) 10,000
         shares  issuable upon the exercise by Millennium of a warrant  expiring
         March 30, 2005. The shares of the Common Stock reported in the table do
         not include (x) 3,334 shares  issuable  upon the exercise of the option
         described in (b) or (y) 16,667 shares issuable upon the exercise of the
         option  described in (c),  neither of which was  exercisable as to such
         shares at May 31, 2004 or within 60 days thereafter.

(6)      A director of the Company.

(7)      The shares of the Common Stock  reported in the table include (a) 6,666
         shares  issuable upon the exercise of an option  expiring June 19, 2012
         under the 2000
<PAGE>                          15

         Option  Plan and (b) 8,333  shares  issuable  upon the  exercise  of an
         option  expiring  September  25, 2012 under the 2000 Option  Plan.  The
         shares of the Common  Stock  reported  in the table do not  include (x)
         3,334 shares issuable upon the exercise of the option  described in (a)
         or (y) 16,667 shares issuable upon the exercise of the option described
         in (b),  neither of which was  exercisable as to such shares at May 31,
         2004 or within 60 days thereafter.

(8)      The shares of the Common Stock reported in the table include (a) 10,000
         shares  issuable upon the exercise of an option expiring July 20, 2005;
         (b) 6,666 shares  issuable upon the exercise of an option expiring June
         19, 2012 under the 2000 Option Plan; and (c) 8,333 shares issuable upon
         the exercise of an option  expiring  September  25, 2012 under the 2000
         Option Plan.  The shares of the Common  Stock  reported in the table do
         not include (x) 3,334 shares  issuable  upon the exercise of the option
         described in (b) or (y) 16,667 shares issuable upon the exercise of the
         option  described in (c),  neither of which was  exercisable as to such
         shares at May 31, 2004 or within 60 days thereafter.

(9)      The shares of the Common Stock  reported in the table include (a) those
         shares  indicated  in the text to Notes 5, 7 and 8 and (b) 1,250 shares
         issuable  to an  executive  officer  upon  the  exercise  of an  option
         expiring October 30, 2011 under the 2000 Option Plan. The shares of the
         Common Stock reported in the table do not include 1,250 shares issuable
         upon the  exercise of the option  described  in (b),  none of which was
         exercisable  as to such  shares  at May  31,  2004  or  within  60 days
         thereafter.

Equity Compensation Plans

         The following table sets forth,  as of March 31, 2004,  certain summary
information  with  respect  to  compensation  plans  under  which  shares of the
Company's Common Stock are authorized for issuance:

                                            EQUITY COMPENSATION PLAN INFORMATION
<TABLE>
<S>                                         <C>                             <C>                  <C>

                                            Number of  securities            Weighted-average    Number of
                                            to be issued upon                price of            securities remaining
                                            exercise of outstanding          outstanding         available for future
                                            options, warrants and            options, warrants   issuance under equity
                                            rights                           and rights          compensation plans
                                                                                                 (excluding securities
                                                                                                 reflected in
                                                                                                 column (a) )
                                                      (a)                       (b)                (c)
____________________________________________________________________________________________________________________________________

Equity compensation plans
approved by security holders                        193,500                    $  1.41            1,816,500

Equity compensation plans not
approved by security holders  (1)                       -                           -                56,000
                                                   ________                     ______             ________
                            Total                   193,500                   $   1.41            1,872,500
</TABLE>
______________

(1) The only plan not approved by the Company's  shareholders as to which shares
may be issued as of March 31,  2004 is: In April  1999,  the Board of  Directors
authorized  a reserve of  100,000  shares of the Common  Stock for  granting  of
warrants and options. Said warrants and options will be sold for a price of five
cents per share and will have an  exercise  price of $1.56 per  share.  The term
will be three years from date of issuance.

Item 12.   Certain Relationships and Related Transactions.

              None.

<PAGE>                          16


Item 13.   Exhibits, Financial Statements and
           Reports on Form 8-K.

                  (a)      Documents Filed with Report

                           (1)      Financial Statements

                                    The financial  statements  listed on the
                                    accompanying  Index to Financial  Statements
                                    are filed as part of this Report.

                           (2)      Exhibits

               Exhibit No.                  Description of Exhibit

                  3.1                       Articles of Incorporation as amended
                                            to date (1)

                  3.2                       Bylaws as amended to date (2)

                  10.1                      1985 Employee Stock Option Plan (3)

                  10.2                      Form of Incentive Stock Option
                                            Agreement (3)

                  10.3                      Form of Non-Qualified Stock Option
                                            Agreement (3)

                  10.4                      Form of Representative Agreement
                                            between the Company and its
                                            Representatives (4)

                  10.5                      Form of Standard Exclusive
                                            Distributor Agreement between the
                                            Company and its Distributors (4)

                  10.6                      Standard Industrial Lease dated
                                            August 26, 1991, between Wayne
                                            Mertes, Mamie Mertes, Mike Butler
                                            and Sarah Butler, as lessor, and the
                                            Company, as lessee (5)

                  10.7                      Stock Purchase Agreement dated
                                            January 20, 2000 by and among the
                                            Company, Millennium Capital
                                            Corporation ("Millennium"), JDK
                                            Associates, Inc. ("JDK") and other
                                            Buyers (6)

                  10.8                      Letter Agreement dated January 20,
                                            2000 ("Consulting Agreement") by and
                                            among the Company, Millennium and
                                            JDK (7)

                  10.9                      Stock Option Plan of 2000 of the
                                            Company (2)

                  10.10                     Forms of Stock Option Agreements (8)

                  10.11                     Employment Agreement dated September
                                            1, 2000 by and between the Company
                                            and Harris Shapiro (9)

                  10.12                     Stock Option Agreement dated
                                            November 27, 2000 by and between the
                                            Company and Terry J. Baker (9)
<PAGE>                          17

                Exhibit No.                  Description of Exhibit

                  10.13                     Agreement and Plan of Merger and
                                            Reorganization, dated as of July 2,
                                            2003, by and among PerfectData
                                            Corporation, SuperCom Ltd. and
                                            SuperCom Merger Sub. Ltd. (without
                                            disclosure schedules or exhibits)
                                            (10)

                  10.14                     Asset Purchase Agreement entered
                                            into as of October 3, 2003 by and
                                            between PerfectData Corporation and
                                            Spray Products Corporation (11)

                  10.15                     First Amendment, dated as of
                                            February 26, 2004, to the Asset
                                            Purchase Agreement, dated as of
                                            October 3, 2003, filed as Exhibit
                                            10.14 (12)

                  10.16                     Addendum to Lease Agreement and
                                            Standard Commercial Lease dated
                                            September 24, 2003 between Albert
                                            and Helen La Monte, as landlords,
                                            and the Company, as tenant (12)

                  23 (a)                    Consent of  Independent  Registered
                                            Public  Accounting Firm (12)

                  23 (b)                    Consent of  Independent  Registered
                                            Public  Accounting Firm (12)

                  99.1                      Certification of Chief Executive
                                            Officer Pursuant to Rule 13a-14
                                            under the Securities Exchange Act of
                                            1934 (12)

                  99.2                      Certification of Chief Financial
                                            Officer Pursuant to Rule 13a-14
                                            under the Securities Exchange Act of
                                            1934 (12)

                  99.3                      Certification Pursuant to Section
                                            906 of Sarbanes-Oxley Act of 2002
                                            (12)
         ______________

(1)      Incorporated  by reference to the Company's  Annual Report on Form 10-K
         for its fiscal year ended March 31, 1990.

(2)      Incorporated  by reference to the Company's  Annual Report on Form 10-K
         for its fiscal year ended March 31, 2000.

(3)      Incorporated  by reference to the Company's  Annual Report on Form 10-K
         for its fiscal year ended March 31, 1985.

(4)      Incorporated  by reference to the Company's  Annual Report on Form 10-K
         for its fiscal year ended March 31, 1987.

(5)      Incorporated  by reference to the Company's  Annual Report on Form 10-K
         for its fiscal year ended March 31, 1992.

(6)      Incorporated by reference to the Company's  definitive  Proxy Statement
         dated March 10, 2000 filed on March 14, 2000.

(7)      Incorporated  by  reference to the  Company's  Form 8-K dated March 31,
         2000 filed April 14, 2000.

(8)      The four forms of stock option  agreements  used under the Stock Option
         Plan of 2000 are filed as Exhibits 4(d)(1) to 4(d)(4),  both inclusive,
         to  the  Company's   Registration  Statement  on  Form  S-8,  File  No.
         333-51774, and are incorporated herein by this reference.

<PAGE>                          18


(9)      Incorporated  by reference to the Company's  Annual Report on Form 10-K
         for its  fiscal  year  ended  March  31,  2001.  (10)  Incorporated  by
         reference to the Company's Form 8-K filed on July 9, 2003.

(11)     Incorporated by reference to the Company's Form 8-K filed on October 8,
         2003.

(12)     Filed or, in the case of Exhibit 99.3, furnished herewith.

(b)      Reports on Form 8-K

                           (1)      On January 20,  2004,  the  Company  filed a
                                    Form 8-K  reporting,  under Item 5, that, on
                                    January 20, 2004, the Company issued a press
                                    release  reporting  that the  Agreement  and
                                    Plan of Merger and  Reorganization  dated as
                                    of July 2, 2003 by and  between  PerfectData
                                    and  SuperCom  Ltd.  and related  agreements
                                    were terminated.

                           (2)      On March 10, 2004,  the Company filed a Form
                                    8-K  reporting,  under Item 4, that the firm
                                    of KPMG LLP had resigned as the Independent
                                    Registered Public  Accounting Firm for the
                                    Company.

                           (3)      On March 29, 2004,  the Company filed a Form
                                    8-K  reporting,  under Item 4, that the firm
                                    of Singer  Lewak  Greenbaum & Goldstein  LLP
                                    was   retained   to  audit   the   financial
                                    statements of the Company and to prepare and
                                    file  the  Company's  tax  returns  for such
                                    fiscal year.

Item 14.   Principal Accountant Fees and Services.

Audit Fees

         KPMG LLP ("KPMG"),  the Company's then  Independent  Registered  Public
Accounting  Firm,   billed  $50,975  for  professional   services  rendered  in
connection  with its audit of the  Company's  annual  financial  statements  for
fiscal 2003 and its review of the Company's financial statements included in the
Company's Forms 10-QSB filed for fiscal 2003.

         KPMG billed the Company $10,750 for professional  services  rendered in
connection with its review of the Company's financial statements included in the
Company's Forms 10-QSB filed for fiscal 2004.

         The  Company's  Audit  Committee  has  authorized a fee estimated to be
$23,500 to $30,000 for the professional  services being rendered by Singer Lewak
Greenbaum & Goldstein,  LLP (the "Singer Firm"), the Company's current auditors,
in connection with its audit of the Company's  annual  financial  statements for
fiscal 2004, of which $15,000 has already been paid.

         The Audit  Committee has authorized  that the Singer Firm be paid a fee
of $6,500 to $8,500 for its  professional  services to be rendered in connection
with its review of each of the Company's  financial  statements  included in the
Company's Forms 10-QSB to be filed for the fiscal year ending March 31, 2005.

Audit-Related Fees

         KPMG billed the Company  (1) $30,000 for its  professional  services in
fiscal 2004 in connection with the Company's Registration Statement on Form S-3,
File  No.  333-109933,  filed  in  connection  with  the  then  proposed  merger
transaction with SuperCom,  which Registration  Statement was withdrawn when the
proposed transaction  terminated,  and (2) $15,000 for its professional services
in  connection  with the  Company's  pending  preliminary  consent  solicitation
statement  relating to  shareholder  approval of the proposed  sale to Spray and
reincorporation of the Company in the State of Delaware.

<PAGE>                          19

         There were no audit-related fees for fiscal 2003.


Tax Fees

         KPMG  billed the  Company  $10,500  for its  professional  services  in
connection with preparing the Company's federal and state tax returns for fiscal
2003.

         The Audit  Committee has authorized  that the Singer Firm be paid a fee
of up to $3,500 for its  professional  services in connection with preparing and
filing the Company's federal and state tax returns for fiscal 2004.

All Other Fees

         During fiscal 2004 KPMG billed the Company $25,000 for its professional
services  in  connection  with a limited  due  diligence  review  of  SuperCom's
financial statements.

         During  fiscal  2003  there  were no other  fees  billed by KPMG to the
Company for products and services in the preceding  three  sections of this Item
14.

Audit Committee Approval

         Pursuant to the Audit Committee  Charter,  only the Audit Committee may
select  annually  the  Independent  Registered  Public  Accounting  Firm for the
Company,  subject to  shareholder  ratification.  Only the Audit  Committee  may
replace the  Independent  Registered  Public  Accounting  Firm. The Charter also
requires  the Audit  Committee  to  approve  the  retention  of the  independent
auditors  for any  non-audit  service  and the fee for such  service.  The Audit
Committee  also  approves the scope of the annual audit and the intended fee for
such service and the fees for the quarterly reviews of the financial  statements
in the Forms  10-QSB.  The Charter does not permit any  delegation  of the Audit
Committee's authority to management and sets forth procedures for annual reviews
by the Audit Committee of the Independent  Registered  Public Accounting Firm to
determine their qualifications and independence.

         With  respect  to all of the  services  described  under  the  captions
"Audit-Related  Fees,"  "Tax  Fees" and "All Other  Fees,"  the Audit  Committee
reviewed in advance the scope of the services to be rendered and determined that
the services were  compatible with  maintaining the  independence of KPMG or the
Singer Firm,  whichever was  applicable.  The Audit  Committee  also approved in
advance all of the fees for such services and for the fees  described  under the
caption "Audit Fees."


<PAGE>                          20

                                   SIGNATURES


         Pursuant to the  requirements of Section 13 or 15 (d) 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.


                             PERFECTDATA CORPORATION

                                      By: /s/ Irene J. Marino
                                      Irene J. Marino, Authorized Officer and
                                      Principal Financial and Accounting Officer


Date:  June 28, 2004

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  Report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities indicated on June 28, 2004.

         Signature                                        Title

/s/ Harris A. Shapiro                    Chief Executive Officer,
    Harris A. Shapiro                    Chairman of the Board and Director
                                         (Principal Executive Officer)

/s/ Irene J. Marino                      V.P. Finance, Chief Financial Officer
    Irene J. Marino                      and Corporate Secretary (Principal
                                         Financial and Accounting Officer)

/s/ Bryan Maizlish                                        Director
    Bryan Maizlish

/s/ Timothy D. Morgan                                     Director
    Timothy D. Morgan


/s/ Tracie Savage                                         Director
    Tracie Savage

/s/ Corey P. Schlossmann                                  Director
    Corey P. Schlossmann

<PAGE>                          21

                             PERFECTDATA CORPORATION

                                 SEC Form 10-KSB

                          Index to Financial Statements


Financial Statements                                             Page

Report of Independent Registered  Public
            Accounting  Firm - March 31, 2004                    F-1

Report of Independent Registered  Public
            Accounting  Firm - March 31, 2003                    F-2

Balance Sheet - March 31, 2004                                   F-3

Statements of Operations -
   Years Ended March 31, 2004 and 2003                           F-4

Statements of Shareholders' Equity
   Years Ended March 31, 2004 and 2003                           F-5

Statements of Cash Flows -
   Years Ended March 31, 2004 and 2003                           F-6

Notes to Financial Statements                                    F-7

<PAGE>                          22



            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


PerfectData Corporation
Simi Valley, California

We have audited the  accompanying  balance  sheet as of March 31, 2004,  and the
related  statements of operations,  shareholders'  equity and cash flows for the
year then  ended.  These  financial  statements  are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audit.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of PerfectData  Corporation as of
March 31,  2004,  and the results of its  operations  and its cash flows for the
year then ended in conformity with accounting  principles  generally accepted in
the United States of America.






SINGER LEWAK GREENBAUM & GOLDSTEIN LLP

Los Angeles, California
May 14, 2004


                                      F-1


<PAGE>

             Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
PerfectData Corporation:

We have audited the accompanying statements of operations, shareholders' equity,
and cash flows of PerfectData Corporation (the Company) for the year ended March
31, 2003.  These financial  statements are the  responsibility  of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the results of operations and cash flows of PerfectData
Corporation  for the year ended March 31,  2003 in  conformity  with  accounting
principles generally accepted in the United States of America.

/s/ KPMG LLP

Los Angeles, California
May 9, 2003, except for the
restatement for discontinued
operations as described in note 2
to the 2003 financial statements,
which is as of June 25, 2004.


                                      F-2

<PAGE>


                             PERFECTDATA CORPORATION
                                  Balance Sheet
                                 March 31, 2004
                  (Amounts in thousands, except share amounts)

                                     Assets
<TABLE>
<S>                                                                                  <C>

Current assets:
   Cash and cash equivalents                                                           $    1,903
   Prepaid expenses and other current assets                                                   30
   Current assets of discontinued operations, net of allowance of $3                          220
                                                                                      -------------------------

               Total current assets                                                         2,153

Property and equipment, at cost, net                                                            -
                                                                                      -------------------------

Total assets                                                                           $    2,153
                                                                                      =========================

                                   Liabilities

Current liabilities:
   Accounts Payable                                                                    $      126
   Accrued compensation                                                                        35
   Other accrued expenses                                                                      77
   Current liabilities of discontinued operations                                             255
                                                                                      -------------------------

               Total current liabilities                                                      493
                                                                                      -------------------------

Commitments and contingencies (note 8)

Shareholders' equity:
   Preferred stock.  Authorized 2,000,000 shares; none issued                                   -
   Common stock, no par value.  Authorized 10,000,000 shares;
        issued and outstanding 6,209,530                                                   11,258
   Accumulated deficit                                                                    (9,598)
                                                                                      -------------------------

               Total shareholders' equity                                                   1,660
                                                                                      -------------------------

Total liabilities and shareholders' equity                                              $   2,153
                                                                                      =========================
See accompanying notes to financial statements.
</TABLE>
                                      F-3
<PAGE>



                             PERFECTDATA CORPORATION
                            Statements of Operations
                       Years ended March 31, 2004 and 2003
              (Amounts in thousands, except per share information)
<TABLE>
<S>                                                                      <C>                  <C>


                                                                               2004                     2003
                                                                          ----------------    -------------------------


Selling, general, and administrative expenses                             $        933        $         668
                                                                          ----------------    -------------------------


               Loss from operations                                               (933)               (668)
                                                                          ----------------    -------------------------

Other income:

    Interest, net                                                         -                               -

    Other, net                                                                      17                   37
                                                                          ----------------    -------------------------


               Loss from continuing operations                                    (916)               (631)

               Income (loss) from discontinued operations                          359                 (11)
                                                                          ----------------    -------------------------

               Net income (loss)                                           $      (557)       $       (642)
                                                                          ================    =========================

Net loss per common share:
   Basic and diluted:
               Loss from continuing operations                             $     (0.15)       $      (0.10)

               Income from discontinued operations                                0.06                    -
                                                                          ----------------    -------------------------

                                                                           $     (0.09)       $      (0.10)
                                                                          ================    =========================

Weighted average shares outstanding:

    Basic and diluted                                                            6,193                6,159

</TABLE>

See accompanying notes to financial statements.

                                      F-4
<PAGE>



                             PERFECTDATA CORPORATION
                       Statements of Shareholders' Equity
                                 (notes 6 and 7)
                       Years ended March 31, 2004 and 2003

                             (Amounts in thousands)

<TABLE>
<S>                                         <C>                  <C>               <C>                       <C>
                                                                                                                   Net
                                                         Common Stock                  Accumulated              shareholders'
                                                 Shares              Amount              deficit                   equity
                                            ----------------     --------------    ------------------        ------------------

Balance at March 31, 2002                         6,159             $ 11,206          $   (8,399)               $   2,807


    Net loss                                         -                    -                 (642)                   (642)
                                            ----------------     --------------    ------------------        ------------------


Balance at March 31, 2003                         6,159               11,206              (9,041)                   2,165


    Stock Compensation                               50                   52                   -                       52

    Net loss                                          -                    -                (557)                   (557)
                                            ----------------     --------------    ------------------        ------------------


Balance at March 31, 2004                         6,209             $ 11,258          $   (9,598)               $   1,660
                                            ================     ==============    ==================        ==================

</TABLE>


See accompanying notes to financial statements.

                                      F-5

<PAGE>

                             PERFECTDATA CORPORATION
                            Statements of Cash Flows
                       Years ended March 31, 2004 and 2003
                             (Amounts in thousands)

<TABLE>
<S>                                                                                <C>                <C>

                                                                                       2004               2003
                                                                                   --------------    ----------------

Cash flows from continuing operating activities:
    Net loss                                                                       $        (916)      $        (631)
    Adjustments to reconcile net loss to net cash used
        in operating activities:

            Depreciation and amortization                                                      6                   20

            Stock issued for services                                                         52                    -

            (Increase) decrease in prepaid expenses and other assets                          32                  (7)

            Increase in accounts payable                                                      54                (106)

            Increase (decrease) in accrued expenses                                           29                 (18)
                                                                                   --------------    ----------------


              Net cash used in continuing operating activities                             (743)                (742)

              Net cash provided by discontinued operating activities                         473                  157
                                                                                   --------------    ----------------


              Net decrease in cash and cash equivalents                                     (270)               (585)


Cash and cash equivalents at beginning of year                                             2,173                2,758

Cash and cash equivalents at end of year                                            $      1,903           $    2,173
                                                                                   ==============    ================


</TABLE>

See accompanying notes to financial statements.

                                      F-6
<PAGE>


                             PERFECTDATA CORPORATION

                          Notes to Financial Statements

                             March 31, 2004 and 2003


(1)      Summary of Significant Accounting Policies

         (a)      Description of Business

                  PerfectData  Corporation  (the  Company)  assembles  and sells
                  computer and office equipment care and maintenance products.

         (b)      Cash and Cash Equivalents

                  The  Company   considers   all  highly   liquid  money  market
                  instruments with an original  maturity of three months or less
                  to be cash  equivalents.  At March 31,  2004,  the Company had
                  cash and cash equivalents of $1,903,000.

         (c)      Inventories

                  Prior to the APA  entered  into with Spray,  inventories  were
                  stated  at the  lower  of  cost or  market  and  consisted  of
                  finished  goods.  Cost  was  determined  using  the  first-in,
                  first-out method.

                  The  Company  transferred  all  inventory  on hand to Spray on
                  October 31, 2003, pursuant to the APA.

(d)      Financial Instruments

                  The  carrying  amounts  related to cash and cash  equivalents,
                  accounts  receivable,  and accounts  payable  approximate fair
                  value due to their relatively short maturity.

(e)      Plant and Equipment

                  Plant and equipment are stated at cost.

                  Depreciation  on plant and equipment is  calculated  using the
                  straight-line  method over the  estimated  useful lives of the
                  assets.  Leasehold  improvements  are amortized  straight line
                  over the shorter of the lease term or estimated useful life of
                  the asset. The estimated useful lives are as follows:

                        Machinery and equipment            3 to 5 years
                        Furniture and fixtures             3 to 5 years
                        Leasehold improvements             Life of lease
                                                                     (continued)

                                      F-7
<PAGE>


                             PERFECTDATA CORPORATION

                          Notes to Financial Statements

                             March 31, 2004 and 2003


(f)      Revenue Recognition

                  The Company  recognizes  revenue when products are shipped and
                  the  customer  takes  ownership  and  assumes  risk  of  loss,
                  collection of the relevant  receivable is probable,  pervasive
                  evidence  of an  arrangement  exists,  and the sales  price is
                  fixed or determinable.

(g)      Loss per Common Share

                  Basic  and  diluted  loss  per  common  share  is based on the
                  weighted average number of shares  outstanding  during each of
                  the respective  periods.  Diluted  earnings per share includes
                  the  dilutive  impact  of stock  options,  warrants,  or other
                  equity instruments. During the years presented herein, because
                  net losses were  incurred,  the impact from such common  stock
                  equivalents was  antidilutive;  accordingly,  the common stock
                  equivalents were excluded from the calculation.

                  The following were excluded from the calculation:

                                       March 31,                March 31,
                  Options               2004                      2003

                  1985 Plan             10,000                     11,500
                  2000 Plan            183,500                    185,000
                  1999 Options              -                       5,000
                  Warrants              20,000                     20,000


(h)      Income Taxes

                  Income taxes are  accounted  for under the asset and liability
                  method. Deferred tax assets and liabilities are recognized for
                  the  future  tax  consequences   attributable  to  differences
                  between the financial  statement  carrying amounts of existing
                  assets  and  liabilities  and their  respective  tax bases and
                  operating  loss and tax  credit  carryforwards.  Deferred  tax
                  assets and  liabilities  are measured  using enacted tax rates
                  expected  to apply to  taxable  income  in the  years in which
                  those  temporary  differences  are expected to be recovered or
                  settled.  The effect on deferred tax assets and liabilities of
                  a change in tax rates is  recognized  in income in the  period
                  that  includes  the  enactment  date.  The   realizability  of
                  deferred  tax  assets is  assessed  throughout  the year and a
                  valuation allowance is established accordingly.
                                                                     (continued)

                                      F-8

<PAGE>

                             PERFECTDATA CORPORATION

                          Notes to Financial Statements

                             March 31, 2004 and 2003


(i)      Use of Estimates

                  The   preparation   of  the  financial   statements   requires
                  management  of the Company to make a number of  estimates  and
                  assumptions  relating  to the  reported  amount of assets  and
                  liabilities  and  the  disclosure  of  contingent  assets  and
                  liabilities  at the date of the financial  statements  and the
                  reported  amounts of revenues and expenses  during the period.
                  Significant  items subject to such  estimates and  assumptions
                  include  the  allowance  for  doubtful   accounts,   inventory
                  valuation, deferred income tax asset valuation allowances, and
                  the estimated  future  operating cash flows from the Company's
                  long-lived  assets.   Considerable   management   judgment  is
                  necessary to estimate  future  operating  cash flows as future
                  cash flows are impacted by competitive  and other factors that
                  are generally out of management's control. Accordingly, actual
                  results could vary significantly from management's estimates.

(j)      Stock-Based Compensation

                  The  Company  applies  the  intrinsic-value-based   method  of
                  accounting  prescribed  by Accounting  Principles  Board (APB)
                  Opinion No. 25, Accounting for Stock Issued to Employees,  and
                  related interpretations  including FASB Interpretation No. 44,
                  Accounting   for   Certain   Transactions    involving   Stock
                  Compensation, and Interpretation of APB Opinion No. 25, issued
                  in March 2000, to account for its  fixed-plan  stock  options.
                  Under this  method,  compensation  expense is  recorded on the
                  date  of  grant  only  if  the  current  market  price  of the
                  underlying  stock exceeded the exercise  price.  SFAS No. 123,
                  Accounting   for   Stock-Based    Compensation,    established
                  accounting    and    disclosure     requirements    using    a
                  fair-value-based method of accounting for stock-based employee
                  compensation  plans.  As allowed by SFAS No. 123,  the Company
                  has  elected to  continue  to apply the  intrinsic-value-based
                  method of accounting  described above and has adopted only the
                  disclosure requirements of SFAS No. 123.

                  The Company is adopting the disclosure  provisions of SFAS No.
                  148, Accounting for Stock-Based  Compensation - Transition and
                  Disclosure.  Due to the  reduction  of the  exercise  price of
                  fixed stock options  through the  cancellation of stock option
                  awards and the granting of replacement awards, per FIN No. 44,
                  Accounting   for   Certain   Transactions    involving   Stock
                  Compensation,  the Company has adopted variable accounting for
                  the replacement  awards,  per FIN No. 28, Accounting for Stock
                  Appreciation  Rights and Other  Variable Stock Option or Award
                  Plans.
                                                                     (continued)
                                      F-9

<PAGE>


                            PERFECTDATA CORPORATION

                          Notes to Financial Statements

                             March 31, 2004 and 2003

                  The Company  applies APB Opinion No. 25 in accounting  for its
                  employees  and director  stock option  plans.  Had the Company
                  determined  compensation  cost  based on the fair value at the
                  grant date for its stock  options  under SFAS No. 123 and SFAS
                  No. 148, the Company's  net loss would have been  increased to
                  the pro forma amounts indicated below. The fair value of these
                  options   was   estimated   at  the  date  of  grant  using  a
                  Black-Scholes   option-pricing  model,  assuming  a  risk-free
                  interest  rate  of  4.57%  -  6.26%,   a  ten-year  term,  50%
                  volatility, and $0 expected dividend rate.

                  (000's, except per share amounts)
<TABLE>
<S>                                                                     <C>            <C>

                                                                          2004             2003

                  Net income, as reported                              $     (557)    $     (642)
                  Deduct total stock-based employee compensation
                     expense determined under fair-value-based
                     method for all awards, net of tax                      (  27)            (4)
                                    Pro forma net income               $     (584)    $     (646)

                  Basic and diluted net loss per common share:
                      As reported                                      $    (0.09)    $    (0.10)
                      Pro forma                                        $    (0.09)    $    (0.10)
</TABLE>


(k)      Impairment of Long-Lived Assets and
                  Long-Lived Assets To Be Disposed Of

                  SFAS No. 144  Accounting  for the  Impairment  or  Disposal of
                  Long-Live  Assets  provides  a  single  accounting  model  for
                  long-lived assets to be disposed of. SFAS No. 144 also changes
                  the  criteria  for  classifying  an asset as held for sale and
                  broadens  the  scope  of  businesses  to be  disposed  of that
                  qualify for reporting as  discontinued  operations and changes
                  the  timing  of  recognizing  losses on such  operations.  The
                  Company  adopted SFAS No. 144 on January 1, 2002. The adoption
                  of SFAS  No.  144  did  not  affect  the  Company's  financial
                  statements.

                  In accordance with SFAS No. 144,  long-lived  assets,  such as
                  property,  plant,  and  equipment,  and purchased  intangibles
                  subject to amortization,  are reviewed for impairment whenever
                  events or changes in circumstances  indicate that the carrying
                  amount of an asset may not be recoverable.  Recoverability  of
                  assets to be held and used is measured by a comparison  of the
                  carrying amount of an asset to estimated  undiscounted  future
                  cash flows
                                                                     (continued)
                                      F-10

<PAGE>
                             PERFECTDATA CORPORATION
                       Statements of Shareholders' Equity
                                 (notes 6 and 7)
                       Years ended March 31, 2004 and 2003

                  expected  to be  generated  by the  asset.  If the
                  carrying amount of an asset exceeds its estimated  future cash
                  flows,  an  impairment  charge is  recognized by the amount by
                  which the carrying  amount of the asset exceeds the fair value
                  of the asset.  Assets to be  disposed  of would be  separately
                  presented  in the balance  sheet and  reported at the lower of
                  the carrying  amount or fair value less costs to sell, and are
                  no  longer  depreciated.  The  assets  and  liabilities  of  a
                  disposed group  classified as held for sale would be presented
                  separately in the appropriate asset and liability  sections of
                  the balance sheet.

                  Prior to the adoption of SFAS No. 144,  the Company  accounted
                  for  long-lived  assets  in  accordance  with  SFAS  No.  121,
                  Accounting  for  Impairment  of  Long-Lived   Assets  and  for
                  Long-Lived Assets to Be Disposed Of.

(l)      Recently Issued Accounting Standards

                  In June 2002,  the FASB issued SFAS No.  146,  Accounting  for
                  Costs  Associated with Exit or Disposal  Activities.  SFAS No.
                  146  addresses  financial  accounting  and reporting for costs
                  associated  with exit or  disposal  activities  and  nullifies
                  Emerging  Issues  Task  Force  (EITF)  Issue  94-3,  Liability
                  Recognition  for Certain  Employee  Termination  Benefits  and
                  Other  Costs  to  Exit an  Activity.  The  provisions  of this
                  Statement are effective for exit or disposal  activities  that
                  are initiated after December 31, 2002, with early  application
                  encouraged.  The  adoption of SFAS No. 146 is not  expected to
                  have a material effect on the Company's financial statements.

(2)      Discontinued Operations

         On  October  3,  2003,  the  Company  entered  into an  Asset  Purchase
         Agreement  (the  "APA")  with  Spray  Products  Corporation  ("Spray"),
         pursuant  to which  the  Company  agreed  to sell to Spray  (or a Spray
         affiliate) substantially all of the operating assets of the Company for
         a price  equal to the sum of the  value of the  inventory,  collectible
         accounts  receivable  and $100,000,  less the amount of trade  payables
         which are being assumed by Spray.

         Since November 1, 2003, Spray has,  pursuant to the APA, been acting as
         a manager for the  fulfillment of orders from the Company's  customers.
         As compensation for Spray's services,  Spray is receiving a fee of 7
         1/2% of net sales.

         Because the Company's  largest  customer had threatened to seek another
         supplier because of a supplier's offer of lower prices,  and because of
         the long delay in closing the transaction,  thereby causing uncertainty
         for customers and Spray, the Company and Spray have agreed in principle
         to the  following  revisions  to the APA: (1)  effective  June 1, 2004,
         Spray  will  assume  full  responsibility  for  all  of  the  Company's
         customers in order to prevent possible losses of customer business; (2)
         the aforementioned  payment of $100,000 will be reduced to $80,000; (3)
                                                                     (continued)
                                      F-11

<PAGE>
                             PERFECTDATA CORPORATION
                       Statements of Shareholders' Equity
                                 (notes 6 and 7)
                       Years ended March 31, 2004 and 2003

         based on the  amounts  of the items  constituting  the  purchase  price
         described  above and as  modified  in (2) as if the closing was held on
         May 31, 2004, the Company will advise Spray of this estimated  purchase
         price and Spray  will  promptly  advance  to the  Company  an amount in
         excess of what the Company owes Spray for product purchased from Spray;
         and (4) the Company may put the assets to Spray for the purchase  price
         on the earlier of (a) September  30, 2004 or (b) the Company  receiving
         shareholder consent to the sale of Spray.

         The  Board  of  Directors,   after   consultation  with  certain  major
         shareholders,  had elected in June 2003, to sell the operating business
         assets of the Company  because,  despite  efforts by the Company during
         the prior fiscal years which had increased sales and reduced  expenses,
         the  Company  continues  to operate  at a loss,  thereby  diluting  the
         Company's  cash,  which is its major asset.  The Board concluded that a
         sale or liquidation  of the operating  assets was in the best interests
         of the Company and its  shareholders  even if no  acquisition or merger
         was effected.

         The Company will seek  shareholders'  approval,  by consents in lieu of
         holding a meeting, to permit the sale of its operating assets to Spray.
         At  such  time as the  Company  has  obtained  formal  approval  of its
         shareholders  to permit  the sale to Spray,  the  Company  will have no
         operations and will thereafter receive no revenues until an acquisition
         or merger is effected.

         The Board of Directors of the Company does not intend to liquidate  the
         Company, but instead,  with the Company having cash or cash equivalents
         currently in excess of  $1,500,000,  the Board  intends to continue its
         search for a suitable merger or acquisition candidate.  Even though the
         Company will have no operations,  the Company  believes its status as a
         publicly-traded  company is valuable  and  therefore  makes it a viable
         merger  candidate.  During the past three fiscal years, the Company had
         been  seeking  acquisitions  which have not been related to its current
         business.  The  Board  was  of  the  opinion  that  profitability  on a
         continuous  basis would not be achieved  absent an acquisition of a new
         business or businesses and/or new products.  However, the Board can not
         determine when any such  acquisition  will be  consummated,  if at all.
         During  recent  years,  three  potential   acquisitions  were  actively
         pursued;  however, all terminated for different reasons and the Company
         incurred expenses in connection therewith.

         No adjustments  have been made to the financial  statements as a result
         of these uncertainties.

         The Company  accounted for the sale as a disposal group under Statement
         of  Financial  Accounting  Standards  ("SFAS")  No.  144.  Accordingly,
         amounts in the financial  statements  and related notes for all periods
         presented have been reclassified to reflect SFAS No. 144 treatment.
                                                                     (continued)
                                      F-12

<PAGE>


                             PERFECTDATA CORPORATION

                          Notes to Financial Statements

                             March 31, 2004 and 2003

The carrying amount of the assets and liabilities of the discontinued operations
at March 31, 2004 were as follows:

         (amounts in thousands except per share information)
<TABLE>
<S>                                                                  <C>                      <C>

                                                                       March 31,
                                                                         2004
         Assets:
            Accounts receivable     net of
               an allowance for doubtful
               accounts of $ 3                                         $   192
            Inventory                                                       28
            Property and equipment, net                                     -
         Total Assets                                                      220

         Liabilities:
           Accounts Payable                                            $   255

         Operating results of the discontinued operations are as follows:

         (amounts in thousands except per share information)
                                                                       March 31,              March 31,
                                                                         2004                   2003

                  Net revenue                                           $2,680                 $2,005

                  Income (loss) from discontinued operations               359                   (11)

                  Income (loss) per share from
                      discontinued operations                           $ 0.06                $     -

</TABLE>


(3)      Concentration of Credit Risk

         Financial  instruments  which  potentially  subject  the  Company  to a
         concentration  of  credit  risk  principally   consist  of  cash,  cash
         equivalents, and accounts receivable.
                                                                     (continued)
                                      F-13

<PAGE>

                             PERFECTDATA CORPORATION

                          Notes to Financial Statements

                             March 31, 2004 and 2003

         As of March 31, 2004, the Company had approximately  $1,903,000 of cash
         equivalents in two financial institutions, which exposes the Company to
         concentration of credit risk. The Company had approximately  $1,896,000
         invested  in highly  liquid  money  market  instruments,  which are not
         federally insured.  The remaining $7,000 was deposited at a bank, which
         is federally insured up to $100,000.

         The Company  sells its  principal  products to a number of customers in
         the retail  industry.  During the years  ended March 31, 2004 and 2003,
         two customers accounted for more than 10% of net sales. These customers
         each  accounted  for 71% and  47%,  and 13% and 23% in 2004  and  2003,
         respectively.  As of March 31, 2004 and 2003, approximately 78% and 38%
         of  recorded  accounts  receivable  were  from  two  wholesale/discount
         merchants.  For the years ended March 31, 2004 and 2003,  sales made to
         these  customers  amounted to $1,911,000  and $337,000 and $942,000 and
         $457,000,  respectively.  To reduce credit risk,  the Company  performs
         ongoing credit evaluations of its customers'  financial  conditions but
         does not generally require  collateral.  New customers  requiring large
         credit accounts are required to provide letters of credit.

(4)      Inventories

         Pursuant to the APA, the Company  transferred  its inventory on hand at
         October 31, 2003 to Spray.  Pursuant to this agreement,  Spray will pay
         the  Company  for  the  inventory  at  the  time  of the  close  of the
         transaction.  The Company  reclassified its inventory,  with a net book
         value of $28,000, to assets of discontinued operations.

(5)      Property and Equipment

         Property and equipment at March 31, 2004 consist of:

                  Machinery and equipment            $        296
                  Furniture and fixtures                        7
                                                              303

                  Less accumulated depreciation
                      and amortization                      (303)
                                                     $         -

(6)      Income Taxes

         A  reconciliation  of the  federal  statutory  income  tax  rate to the
         effective  income  tax rate on loss from  continuing  operations  is as
         follows:
                                                                     (continued)
                                      F-14

<PAGE>

                             PERFECTDATA CORPORATION

                          Notes to Financial Statements

                             March 31, 2004 and 2003



                                                                    March 31
                                                                2004        2003
         Federal statutory rate                                  34%         34%
               Increase (reductions) in taxes due to:
           State income taxes (net of federal benefit)            3            6
           Change in valuation allowance                        (18)          46
           Dividends-received deduction                           1          (3)
           California net operating loss limitation               -          (3)
           Expiration of federal net operating loss             (16)        (74)
           Expiration of state net operating loss                (4)          -
           Expiration of general business credit                  -          (3)
           Other                                                  -          (3)

                                                                  -%          -%


         The  tax  effects  of  temporary   differences  that  give  rise  to  a
         significant  portion of the  deferred  tax assets at March 31, 2004 are
         summarized as follows (in thousands):

                  Deferred tax assets (liabilities):
                           Net operating losses                        $1,978
                           Inventories                                     13
                           Accrued expenses                                43
                           Business tax credit carryforwards               12
                           Other                                           16
                                                                        2,062

                           Less valuation allowance                     2,002
                                                                       $    -

         At  March  31,  2004,   the  Company  had  net  operating   loss  (NOL)
         carryforwards  of  approximately  $5,453,000 and $2,205,000 for federal
         income tax purposes and California  income tax purposes,  respectively,
         expiring in varying amounts through 2023. The NOL carryforwards,  which
         are available to offset  future  profits of the Company and are subject
         to  limitations  should a  "change  in  ownership"  as  defined  in the
         Internal  Revenue  Code  occur,  will  begin to  expire  in 2009 if not
         utilized.  Additionally,  the Company has general  business  tax credit
         carryforwards  of  approximately  $12,000 which will begin to expire in
         2006.
                                                                     (continued)
                                      F-15

<PAGE>



                             PERFECTDATA CORPORATION

                          Notes to Financial Statements

                             March 31, 2004 and 2003

         Realization  of the future tax  benefits of the NOL  carryforwards  and
         other  deferred  tax assets is dependent  on the  Company's  ability to
         generate  future  taxable  income  within  the  periods  in which  they
         benefit.  In  assessing  the  likelihood  of  utilization  of  existing
         deferred tax assets,  management  considered the historical  results of
         continuing  operations  over  the  last  three  years  and the  current
         economic  environment  in which the Company  operates.  Management  has
         determined  that future  taxable income of the Company will more likely
         than not be  insufficient  to realize the  recorded  net  deferred  tax
         assets of  $2,062,000  and has  recorded a valuation  allowance  of
         $2,062.00 During the year ended March 31, 2004, the Company increased
         the valuation allowance in deferred tax assets by $118,000.

(7)      Shareholder's Equity

         On January 20, 2000, the Company  entered into certain  agreements with
         Millennium  Capital  Corporation  (MCC) and JDK Associates  Inc. (JDK).
         Pursuant to the  agreements,  the Company sold 1,333,333  shares of its
         common stock to MCC, JDK and certain  other buyers and issued a warrant
         to purchase 1,800,000 shares of the Company's common stock at $2.75 per
         share, for aggregate  consideration of $3,000,000.  In addition,  under
         the agreements,  MCC and JDK will provide financial advisory assistance
         to the Company in searching  for and closing  future  acquisitions  and
         financings  for which they will  receive an  advisory  fee of 5% of the
         estimated purchase price for a future acquisition which they introduced
         to the Company or for  additional  capital  raised in support of future
         acquisitions. The term of this consulting agreement is five years.

         Because  of the  significance  of these  agreements,  the  Company  was
         required to obtain, and they did obtain on March 31, 2000,  shareholder
         approval.   Immediately  thereafter,   the  warrant  holders  exercised
         warrants to purchase 1,780,000 shares of common stock, resulting in the
         issuance  on March  31,  2000 of  1,515,406  shares  of  common  stock.
         Accordingly,  on March 31,  2000,  2,848,739  shares were issued for an
         aggregate consideration of $3,000,000.

         For financial reporting  purposes,  the Company has accounted for these
         transactions  as an increase in common stock for  $3,000,000,  recorded
         net of the  applicable  costs.  The future 5%  consulting  fees will be
         accounted for if and when occurred.

         The  remaining  warrants to purchase  20,000  shares of common stock at
         $2.75 per share are outstanding at March 31, 2004.

         On July 31, 2003,  the Company  issued  50,000  shares of the Company's
         common stock to the Chairman of the Audit Committee as compensation for
         his  services  over the past three  years.  The  Company  has  recorded
         compensation expense of $51,500 for the shares.
                                                                     (continued)
                                      F-16
<PAGE>


                             PERFECTDATA CORPORATION

                          Notes to Financial Statements

                             March 31, 2004 and 2003

         The  articles of  incorporation  authorize a class of  preferred  stock
         issuable in classes and series with such  designations,  voting rights,
         redemption  provisions,  dividend  rates,  liquidation  and  conversion
         rights,  and other  preferences and limitations as may be determined by
         the board of directors. No preferred stock was outstanding at March 31,
         2004.

(8)      Stock Option and Bonus Plans

         1985 Stock Option Plan

         During  November 1985,  the Company  adopted the 1985 Stock Option Plan
         (the "1985 Plan")to grant incentive and  nonqualified  stock options to
         officers  and key  employees  of the Company for the  purchase of up to
         500,000  shares of the  Company's  common  stock.  Under the 1985 Plan,
         options  were  granted at prices  equal to or greater  than fair market
         value at date of grant. The shares, subject to various limitations, are
         exercisable over terms not to exceed ten years. No options were granted
         during the three years ended March 31, 2004. A total of 377,750 options
         were  exercised  through  March 31,  2004,  with  10,000  options  left
         outstanding.  The  1985  Plan has  expired;  therefore,  no  additional
         options can be issued under its terms.

         On March 31, 2003,  an employee of the Company was  terminated  who was
         previously  granted an option to purchase  1,500 shares of common stock
         at  $2.0625  per  share.  As the  terminated  employee  had 90  days to
         exercise,  the option was  outstanding as of March 31, 2003. The option
         subsequently expired unexercised.

         Activity under the 1985 Plan is summarized as follows:

                                                                       Weighted
                                                    Number of          average
                                                    shares             exercise
                                                                         price

         Options outstanding at March 31, 2002      11,500           $   1.3017
         Options canceled                                -                    -

         Options outstanding at March 31, 2003      11,500               1.3017
         Options canceled                           (1,500)              2.0625

         Option outstanding at March 31, 2004       10,000           $   1.1877
                                                                     (continued)
                                      F-17
<PAGE>
                             PERFECTDATA CORPORATION

                          Notes to Financial Statements

                             March 31, 2004 and 2003

         The weighted  average  remaining  contractual  life of the  outstanding
         options was approximately 1.3 years at March 31, 2004.

         1999 Options

         On April 28, 1999,  the board of directors  authorized  the granting of
         options or warrants to purchase up to an aggregate of 100,000 shares of
         common stock to directors,  employees,  or consultants.  The options or
         warrants were to be sold to the grantee at $0.05 per share,  to have an
         exercise price of $1.56 per share,  and to have a three-year  term from
         the respective  date of grant. A total of 24,000 options were exercised
         through  March 31,  2004.  Activity  for these  options and warrants is
         summarized as follows:

                                                                    Weighted
                                                                average exercise
                                                       Shares         price

         Options outstanding at March 31, 2002          13,000       $  1.56
         Canceled                                       (8,000)         1.56

         Options outstanding at March 31, 2003           5,000          1.56
         Canceled                                       (5,000)         1.56

         Options outstanding at March 31, 2004                -      $     -

         2000 Stock Option Plan

         On May 22, 2000,  the  Company's  board of directors  adopted the Stock
         Option Plan of 2000 of PerfectData  Corporation (the "2000 Plan") which
         provides for the granting of options to directors, officers, employees,
         and  consultants  of the  Company.  The  Company's  board of  directors
         reserved  1,000,000  shares of common  stock  under the 2000  Plan.  On
         September 7, 2000,  the Company's  board of directors  amended the 2000
         Plan to reserve an  additional  1,000,000  shares of common  stock.  On
         October 19, 2000,  the  shareholders  of the Company  approved the 2000
         Plan and ratified options previously granted.

         Options  granted  under the 2000 Plan  shall be at a price no less than
         the fair  market  value of the common  stock on the date of grant or in
         the case of  nonqualified  stock options at a price equal to or greater
         than 85% of the fair market value on the date of grant. Options granted
         under the 2000 Plan are  exercisable  at various times as determined by
         the board of directors or its designee.
                                                                     (continued)
                                      F-18
<PAGE>

                             PERFECTDATA CORPORATION

                          Notes to Financial Statements

                             March 31, 2004 and 2003

         On October  31,  2001,  the  Company  granted  options to  purchase  an
         aggregate  of  10,000  shares  of  common  stock at $3.43  per share to
         various employees.  The option price was equal to the fair market value
         at the time of  grant.  All of the  options  described  were to  become
         exercisable in four substantially equal  installments,  commencing with
         the first anniversary of the respective date of grant.

         On June 15,  2002,  the Company  granted an option to  purchase  10,000
         shares  of  common  stock  at  $1.60  per  share  to each  of the  five
         directors.  The option price was equal to 120% of the fair market value
         at the time of  grant.  All of the  options  described  were to  become
         exercisable in three substantially equal installments,  commencing with
         the first anniversary of the respective date of grant.

         On  September  17, 2002,  the board of  directors  canceled the options
         granted to each  director  pursuant to the 2000 Plan, on March 31, 2000
         to purchase  25,000  shares of common  stock at $18.50 per share and on
         September  7, 2000,  to purchase  25,000  shares of the common stock at
         $4.63 per  share.  None of the  options to  purchase  an  aggregate  of
         250,000 shares were exercised.

         On September 26, 2002, the Company granted an option to purchase 25,000
         shares  of  common  stock  at  $1.00  per  share  to each  of the  five
         directors.  The fair market value of the stock on the date  shareholder
         approval was obtained was below the exercise price.  All of the options
         described  were to  become  exercisable  in three  substantially  equal
         installments,  commencing with the first  anniversary of the respective
         date of grant.  In  accordance  with FIN 44, the  Company  has  adopted
         variable  accounting  for these  replacement  awards.  No  compensation
         expense has been recognized in the financial results as the fair market
         value has not exceeded the exercise price.

         On March 31, 2003,  an employee of the Company was  terminated  who was
         previously  granted an option to purchase  1,500 shares of common stock
         at $3.43 per share. As the terminated employee had 60 days to exercise,
         the  option  was   outstanding   as  of  March  31,  2003.  The  option
         subsequently expired unexercised.
                                                                     (continued)
                                      F-19
<PAGE>


                             PERFECTDATA CORPORATION

                          Notes to Financial Statements

                             March 31, 2004 and 2003

         Activity under the 2000 Plan is summarized as follows:
                                                                        Weighted
                                                     Number of    average option
                                                        shares           price

         Options outstanding at March 31, 2002         260,000        $    11.25

         Options granted                               175,000              1.17
         Options canceled                             (250,000)            10.97

         Options outstanding at March 31, 2003         185,000              1.29

         Options canceled                               (1,500)            3.43

         Options outstanding at March 31, 2004         183,500        $     1.28

         As of March 31, 2004, options to purchase 62,584 shares of common stock
         are exercisable at a weighted average  exercise price of $1.325.  As of
         March 31, 2004, 1,816,500 shares were available for future grants.

         The following table summarizes in more detail information regarding the
         Company's  stock options  outstanding  under the 2000 Plan at March 31,
         2004:


<TABLE>
<S>             <C>                  <C>                   <C>                 <C>
                                    Weighted Average                            Weighted Average
Exercise        Outstanding         Remaining                Exercisable        Remaining
   Price          Options           Contractual Life         Options            Contractual Life

$1.00             125,000                   7.6                  41,667                   7.6
$1.60              50,000                   8.3                  16,667                   8.3
$3.43               8,500                   8.5                   4,250                   8.5

Total             183,500                   8.4                  62,584                   8.4
</TABLE>
                                                                     (continued)
                                      F-20
<PAGE>


                             PERFECTDATA CORPORATION

                          Notes to Financial Statements

                             March 31, 2004 and 2003

         (9) Commitments

         The Company  leases  office space under a six-month  lease that expires
         October 15, 2004. The Company had previously leased a facility under an
         operating  lease which expired June 20, 2003. The Company  continued to
         occupy the facility,  along with a subtenant to whom the Company sublet
         warehouse space, on a month-to-month basis until October 31, 2003.

         Rental expense,  net of sublease  income,  was $50,000 and $100,000 for
         the years ended March 31, 2004 and 2003, respectively.












                                      F-21
<PAGE>


                             PerfectData Corporation
                          Index to Exhibits Filed with
                          Annual Report on Form 10-KSB


         Exhibit No.           Description of Exhibit                       Page

          10.15       First Amendment, dated as of February                  E-2
                      26, 2004, to the Asset Purchase Agreement,
                      dated dated as of October 3, 2003, between
                      PerfectData Corporation, and Spray
                      Products Corporation

          10.16       Addendum to Lease Agreement and                        E-4
                      Standard Commercial lease dated as of
                      September 24, 2003 between Albert and
                      Helen La Monte, as landlord, and the
                      Company, as tenant


          23 (a)      Consent of Independent Registered
                                 Public Accounting Firm                     E-20

          23 (b)      Consent of Independent Registered
                                 Public Accounting Firm                     E-21

          99.1        Certification of Chief Executive                      E-22
                      Officer Pursuant to Rule 13a-14
                      under the Securities Exchange Act of 1934

          99.2        Certification of Chief Financial Officer              E-24
                      Pursuant to Rule 13a-14 under the Securities
                      Exchange Act of 1934

          99.3        Certification Pursuant to Section 906 of              E-26
                      Sarbanes-Oxley Act of 2002

                                      E-1

<PAGE>


                                                                   Exhibit 10.15



                                 FIRST AMENDMENT
                                       TO
                            ASSET PURCHASE AGREEMENT


         This  First  Amendment  (the  "Amendment"),  dated  as of the 26 day of
February,  2004, to the Asset Purchase  Agreement (the  "Original  Agreement"),
dated as of October 3,  2003,  between  PerfectData  Corporation,  a  California
corporation, and Spray Products Corporation, a Pennsylvania corporation.


                               W I T N E S S E T H

         WHEREAS, the parties hereto entered into the Original Agreement whereby
Seller agreed to sell, and Purchaser agreed to purchase,  substantially  all the
assets of Seller; and

         WHEREAS, the parties desire to amend the Original Agreement as provided
for herein;

         NOW,  THEREFORE,   in  consideration  of  the  mutual  representations,
warranties,  covenants  and  agreement  set forth  herein,  the parties agree as
follows:

         1. The second sentence of Section 1.5 is hereby amended by the addition
of the following:

                           "and as provided in Section 4.7 hereof."

         2. The following shall be inserted as Section 4.7:

                           "4.7 Insurance.  Purchaser agrees to maintain product
                           liability  insurance  covering  not only all products
                           manufactured or shipped by it post-closing,  but also
                           including all products manufactured or shipped by the
                           Purchaser prior to the Closing Date,  including those
                           during the management  period pursuant to Section 5.6
                           hereof."

         3. Section 5.6.3(a) is hereby amended to add the following:

                           "(iii) be  responsible  for all freight and  shipping
                           charges  incurred by the Buyer in connection with the
                           transport  of  inventory  from  the  Facility  to the
                           customers."

         4. Section 5.6.3 (b)(ii) is hereby deleted in its entirety.

                                      E-2
<PAGE>


         5. Except as specifically modified herein, the Original Agreement shall
not be modified and shall remain in full force and effect.

         6. All capitalized terms not specifically defined herein shall have the
meaning ascribed to them in the Original Agreement.

         IN WITNESS WHEREOF,  the parties have executed this Amendment as of the
date first set forth above.

                                                     PURCHASER:
                                                     Spray Products Corporation


                                                     By:   /s/Bart Bastian
                                                     Name:  Bart Bastian
                                                     Title:  President



                                                     SELLER:
                                                     PerfectData Corporation


                                                     By:   /s/Harris A. Shapiro
                                                     Name:  Harris A. Shapiro
                                                     Title:  Chairman of the
                                                             Board and Chief
                                                             Executive Officer





                                      E-3

<PAGE>





                                                                   Exhibit 10.16

         ADDENDUM TO LEASE AGREEMENT LANDLORD: Albert and Helen LaMonte

         TENANT:     Perfectdata Corporation

         DATE:       March 29, 2004

         PROPERTY:   1445 E. Los Angeles Avenue, Suites # 208

         REGARDING:  Lease Extension LANDLORD:
         TENANT:     PerfectData Corporation


         This  document (1 pages)  serves as written  evidence of an addendum to
         the Master Lease dated  September 24, 2003,  by and between  Albert and
         Helen LaMonte,  "Landlord" and Perfectdata Corporation,  "Tenant". This
         addendum is  incorporated  by  reference  and made a part of the Master
         Lease agreement.

         The Master Lease Agreement is hereby amended to reflect the following:

            1. It  is  agreed  that  the  term  of  this  Lease  shall  continue
               uninterrupted  through October 15, 2004 unless sooner  terminated
               as provided in the Master Lease Agreement.

         Other than the  modifications  specified  herein,  all other  terms and
         conditions of the Master Lease agreement shall remain fully enforceable
         as written.  This  addendum  and the Master Lease shall not be modified
         unless done in writing, signed and dated by all parties to be bound.


         The signatures of the parties hereto is evidence of their understanding
         of a willingness to be bound by this Addendum.

         LANDLORD:                           TENANT:

         By /s/ Albert La Monte Date 5/11/04 By /s/ Irene J. Marino Date 4/19/04
         ___________________________                Irene Marino

         By /s/ Helen La Monte Date 5/12/04
                                      E-4

<PAGE>


STANDARD COMMERCIAL LEASE                        PROJECT: EXECUTIVE CENTER OF
                                                 SIMI VALLEY ADDRESS: 1445 LOS
                                                 ANGELES AVENUE
               GROSS LEASE                       SUITE: 208
                                     CITY/STATE/ZIP: SIMI VALLEY, CALIF. 93065

1. PARTIES. This Lease dated September 24, 2003 is entered between Albert and
   Helen LaMonte, ("Landlord"), and Perfectdata Corporation, ("Tenant").

2. NOTICES.
   Any notice required hereunder shall be in writing and served personally or
   sent registered or certified United States mail, postage prepaid, addressed
   as follows:

LANDLORD: Albert and Helen LaMonte          TENANT: Perfectdata Corporation
          Executive Center of Simi Valley         attn: Irene Marino
          1445 Los Angeles Ave. Suite 301        1445 Los Angeles Ave. Suite 208
          Simi Valley, California 93065           Simi Valley, California 93065

3. PREMISES.

   3.1 Landlord  leases to Tenant and Tenant leases from Landlord,  on the terms
and conditions  hereinafter set forth,  that certain demised  premises and other
improvements  located  thereon  situated in the City of Simi  Valley,  County of
Ventura , State of California, commonly known as 1445 Los Angeles Avenue , Suite
#208.

   3.2 Landlord shall provide Tenant with  possession of the Premises  effective
October 15, 2003, as agreed  between  Tenant and Landlord and subject to receipt
by Landlord of the fully executed Lease document and the monies due thereunder ,
and rent payments as required  herein shall  commence as of October 15, 2003. If
Tenant  causes a delay in  occupancy,  then there shall be no  adjustment to the
commencement date of this Lease nor Tenant's obligation to make rent payments.

   3.3 Tenant's  Premises,  consists of approximately 667 rentable square feet .
The legal  description  of the  Premises  is set forth in  Exhibit  "A" which is
attached to this Lease.

4. TERM.

   4.1 The term of this Lease is for Zero (0) years Six (6) months ,  commencing
on October 15, 2003 and ending on April 15, 2004  unless  sooner  terminated  as
hereinafter provided.

   5. MONTHLY RENT. 5.1 Tenant shall pay Landlord as monthly "base rent" for the
Premises the sum of Nine hundred fifty and 50/100  ($950.00)  dollars per month,
in advance on the first day of each month  beginning  October 15, 2003. Rent for
any period  during  the term of this Lease  which is for less than one (1) month
shall be a pro rata portion of the monthly installment.  Said proration shall be
calculated  on the  basis of a thirty  (30) day  month.  Rent  shall be  payable
without  notice or demand and without any  deduction,  off-set,  or abatement in
lawful money of the United  States,  except as set forth in sub  paragraph  22.3
herein,  to the  Landlord  at the address  stated  herein for notices or to such
other  persons  or such other  places as the  Landlord  designates  to Tenant in
writing.

6. COST OF LIVING RENTAL ADJUSTMENT.

   6.1 The  monthly  "base rent" in Article 5 shall be  increased  on the annual
anniversary  date of this  Lease  by the  greater  of 5% or the  percent  or the
percentage  that  the  United  States  Department  of  Labor,  Bureau  of  Labor
Statistics, Consumer Price Index for "All Urban Consumers" (for all items in the
Los  Angeles/Long  Beach/ Anaheim areas)  ("Index") has increased from the first
month of the Lease term through the month in which the rent is to be increases.
         SAMPLE RENT CALCULATIONS:
                  a. Assume for  purposes of example  that the  beginning  index
                  number  (month  number  1 of the  Lease  Term)  is 208 and the
                  extension  index number (month number 13 of the Lease Term) is
                  219 and the rent is $1,000.
                  b. The fraction  would be extension  index/beginning  index of
                  219/208 x or $1,000 = $1, 053.00.
                  c. The new rent would be $1, 053.00.

   6.2 The Index for the month in which the rent is to be  increased  may not be
available on the rental adjustment date. At such time as the Index is available,
Landlord  shall  provide  written  notice to Tenant  and  Tenant  shall make the
necessary rental adjustment payment to Landlord within fifteen (15) days of said
written notice.  If at any time there does not exist an Index in the same format
as herein  described,  then the Parties shall  substitute  therefore an official
index  publishes  by the  Bureau  of Labor  Statistics  or its  successor  which
achieves the same intended purposes.

7. ANNUAL RENTAL ADJUSTMENT FOR EXPENSES.
    7.1 Definitions. As used in this Lease, the following terms are defined as
follows:
         (a) "Base Year" shall mean the calendar year 2003.
         (b) "Tenant  Proportionate Share" shall mean a fraction,  the numerator
         of which is the number of square feet of rentable  office space covered
         by the  Lease  and the  denominator  of which is the  total  number  of
         rentable  square feet of office space in the  Building,  whether or not
         such space is actually rented.

                                   E-5
<PAGE>

         (c)  "Operating  Expenses"  means all  direct  costs of  operation  and
         maintenance  of the  Building  as  determined  by  standard  accounting
         practices and shall include,  but shall not be limited to the following
         costs:  real property taxes, fees for permits relating to the building,
         water and sewage charges,  insurance  premiums,  utilities,  janitorial
         services  for common  areas,  labor of  building  attendants,  building
         management,  maintenance of elevators and mechanical systems, supplies,
         materials,  equipment,  and tools  used in  building  maintenance,  and
         upkeep of any  landscaping and common areas.  Operating  Expenses shall
         not include depreciation on the building and leasing commissions.

   7.2 If  Landlord's  Operating  Expenses for any calendar  year after the base
year exceeds those paid or incurred for the base year, then Tenant shall pay its
proportionate  share of the increase  within ten (10) days of the billing  date.
Adjustment is based upon the increase in Operating  Expenses over the base year.
Such Operating Expenses shall be based upon a square foot computation ("Tenant's
Proportionate Share") with Tenant's space being approximately 1.68 %of the total
rentable square feet of the building of which the Premises comprise a part.

   7.3  Landlord  shall  attempt  to  complete  its  computation  of the  actual
Operating  Expense  increases by March of the year  following the year for which
the computation is to be made.  Tenant shall pay any additional  amounts even if
at the time that Landlord's computation of actual Operating Expenses is made the
Lease term is expired and Tenant has vacated the Premises.

 8. SECURITY DEPOSIT.

   8.1 Tenant shall deposit with  Landlord upon  execution of this Lease the sum
of Nine hundred fifty and 00/100  ($950.00)  dollars as security deposit for the
Tenant's  faithful  performance  of the  provisions  of this  Lease.  The amount
required as security deposit shall be equivalent to one (1) month's rent.

   8.2 If Tenant fails to pay rent or other charges due hereunder,  or otherwise
defaults with respect to any provision of this Lease, Landlord may use, apply or
retain all or any portion of said deposit for:
         (a) the payment of any rent or other charge in default, or
         (b)  the  payment  of any  other  sum for  which  Landlord  may  become
         obligated by reason of Tenant's default, or
         (c) to  compensate  Landlord for any loss or damage which  Landlord may
         suffer thereby.

   8.3 Tenant shall  immediately,  upon written demand,  pay to Landlord the sum
equal to that portion of t he deposit  expended or applied by Landlord which was
provided for in this paragraph so as to maintain the security deposit in the sum
initially deposited with Landlord. Tenant's failure to do so shall be a material
breach of this Lease. Such reimbursement shall be payable in cash or by way of a
certified money order. Lessee may not use any portion of the security deposit to
satisfy Lessee's rental obligations including the last month's rent.

   8.4 If Tenant  performs  all of Tenant's  obligations  under this Lease,  the
security  deposit or that portion  thereof which has not previously been applied
by the Landlord,  shall be returned to Tenant  within  fourteen (14 ) days after
the  expiration  of the term of this  Lease,  or after  Tenant has  vacated  the
Premises, whichever is later.

9. USE AND USES PROHIBITED.

   9.1 Tenant shall use the Premises  only for a general  business  office , and
for no other use without the Landlord's prior written consent.

   9.2 Tenant  shall not do,  bring,  or keep  anything in or about the Premises
that will cause a  cancellation  of any  insurance  covering the Premises or the
building in which the Premises are located. If the rate of any insurance carried
by the Landlord is increased  solely as a result of Tenant's  use,  Tenant shall
pay to Landlord  within ten (10) days after written  demand from  Landlord,  the
amount of any such increase.

   9.3 Tenant shall comply with all laws concerning the Premises or Tenant's use
of the Premises,  including without limitation,  the obligation at Tenant's cost
to alter,  maintain,  or restore the Premises in compliance and conformity  with
all laws  relating to the use, or occupancy of the Premises by Tenant during the
term of this Lease.

   9.4 Tenant shall not use or permit the use of the Premises is any manner that
will  tend to create  waste or a  nuisance  or, if there  shall be more than one
tenant of the building containing the Premises, which shall unreasonably disturb
any other tenant.

10. TENANT ACCEPTANCE OF PREMISES AND COMPLIANCE WITH LAW.
   10.1 Tenant accepts the Premises in their  condition  existing as of the date
that Tenant possesses the Premises, subject to all applicable zoning, municipal,
county and state laws,  ordinances,  regulations governing or regulating the use
of the  Premises  and  accepts  this Lease  subject  thereto  and to all matters
disclosed thereby.

   10.2  Tenant  shall  be  responsible   for  complying  with  any  such  laws,
ordinances, or regulations prior to possession of the Premises.

   10.3 Tenant  acknowledges that neither Landlord nor its agent(s) has made any
representation  or  warranty  as  to  the  condition  of  the  Premises  or  the
suitability of the Premises for the conduct of Tenant's business.

                                      E-6
<PAGE>

11. TAXES.

   11.1 Real Property  Taxes;  Landlord  shall pay all real  property  taxes and
general  assessments  levied and  assessed  against  the  building  in which the
Premises are located during the term of this Lease.

   11.2 Personal  Property Taxes;  Tenant shall pay, prior to  delinquency,  all
taxes assessed against and levied upon fixtures, furnishings, walls (which shall
be defined as movable walls and  partitions),  equipment and all other  personal
property of Tenant contained in the Premises.  Tenant shall cause said fixtures,
furnishings,  walls,  equipment,  and all other personal property to be assessed
and billed separately from the real property of the Landlord.  In the event that
any or  all of  Tenant's  fixtures,  furnishings,  walls,  equipment,  or  other
personal  property  shall be assessed and taxed with  Landlord's  real property,
Tenant shall pay to Landlord  Tenant's share of such taxes prior to delinquency,
or within  thirty  (30)  days,  after  delivery  to Tenant of a  statement  from
Landlord in writing  setting  forth the amount of such taxes  applicable  to the
Tenant's personal property, whichever is sooner.

12. UTILITIES AND SERVICES.
   12.1  Landlord will furnish the Premises  with  electricity  suitable for the
intended  use  of  the  Premises  as a  general  business  office,  heating  and
air-conditioning  for  the  comfortable  use  and  occupancy  by  Tenant  of the
Premises,  plus furnishing,  supplying,  and maintaining  building common areas,
parking areas,  and restroom  facilities  including water and sewage disposal in
the building in which the Premises are located,  all at the Landlord's  expense,
except electric,  unless otherwise agreed to in this Lease. Said utilities shall
be  provided  daily  except for  heating  and  air-conditioning  which  shall be
provided by Landlord Monday through  Saturday during business hours of 7:00 a.m.
to 7:00 p.m. If the Tenant shall require  electrical  current or installation of
electrical  equipment  including but not limited to electronic  data  processing
machines  or  computers,  using  current  which  will in any  way  substantially
increase  the amount of the  electricity  usually  furnished  for use as general
office space,  Tenant will obtain prior  written  approval from the Landlord and
pay  monthly for the  additional  direct  expenses  involved.  Tenant  shall pay
monthly,  within 10 days of Landlord's  billing,  for his pro-rata  share of the
cost of electric  service to the Premises  based upon a square foot  computation
("Tenant's  Proportionate Share") with Tenant's space being approximately 1.68 %
of the total rentable square feet of the Building of which the Premises become a
part.

13. MAINTENANCE AND REPAIRS.

   13.1 By entering into the  Premises,  Tenant shall be deemed to have accepted
the Premises as being in good and sanitary order, condition and repair.

   13.2 Landlord's Obligations:
         (a) Except as provided  in Article 19, and except for damage  caused by
         any  negligent  or  intentional  act or  omission  of Tenant,  Tenant's
         agents,  employees or  invitees,  Landlord at its sole cost and expense
         shall keep in good condition and repair the foundation, exterior walls,
         exterior  roofs,  building  common  area  plumbing,   heating  and  air
         conditioning  systems,  sidewalks and other "common area" items. If the
         cost of Landlord's  obligations  under this Subparagraph 13.2 increases
         for any reason  outside the control of  Landlord or all  tenants,  then
         such  increase  shall be paid by each tenant on a leasable  square foot
         basis.
         (b)  "Common  area"  items  shall be defined to include  those items of
         maintenance or repair which are not directly  attributable  to Tenant's
         Premises  but which are  attributable  to the benefit of all tenants in
         the building.
         (c) If Landlord  determines that  additional  services are required for
         use of a specific  Tenant,  including  but not  limited to  ,additional
         trash removal, additional repairs, increased utility use, then Landlord
         shall have the right to charge  Tenant one hundred  (100%) of such cost
         or increase,  which shall be payable immediately upon written demand by
         Landlord.

14. ALTERATIONS AND ADDITIONS.

   14.1 Tenant shall not, without  Landlord's  prior written  consent,  make any
alterations, improvements or additions in or about the Premises.
         (a) As a condition to giving  consent,  Landlord may require  Tenant to
         remove,  at Tenant's sole cost, any such alterations,  improvement,  or
         additions at the expiration of the term, and to restore the Premises to
         their prior  condition by giving Tenant thirty (30) days written notice
         prior to the  expiration of the term that Landlord  requires  Tenant to
         remove itself from the Premises.
         (b) Unless  Landlord  requires  their  removal as set forth above,  all
         alterations,  improvements  or additions which are made on the Premises
         by Tenant  shall become the property of Landlord and remain upon and be
         surrendered with the Premises at the expiration of the term.

   14.2  Notwithstanding  the terms of this Article 14, Tenant's trade fixtures,
furniture,  equipment,  and other  machinery other than that which is affixed to
the Premises so that it cannot be removed without material or structural  damage
to the  Premises,  shall  remain  the  property  of the Tenant and be removed by
Tenant at the expiration of the term of this Lease.

15. FREE FROM LIENS.
   15.1  Tenant  shall keep the  Premises  and the  property  in or on which the
Premises  are located  free from any liens  arising  out of any work  performed,
material furnished,  or obligation  incurred by Tenant.  Tenant shall not record
this Lease without Landlord's consent.

16. TENANT'S PERFORMANCE.
   16.1 With the  exception of rental  payments  due herein,  if Tenant fails to
adhere to any time  limits set forth in this Lease to  complete  work or perform
any other requirement  herein provided to be performed by Tenant during the term
of this Lease or prior to the
                                      E-7
<PAGE>

beginning of this Lease,  or if Tenant  causes a delay in the  completion of any
work performed by any person on the Premises or its appurtenances, then Landlord
shall  provide  Tenant will written  notice of Tenant's  violation of this Lease
provision.
         (a) If the  violation  is not  corrected  within  ten (10)  days  after
         notice,  Landlord shall have, in its discretion,  the right to exercise
         any of the legal and  equitable  remedies  set forth in  Article  22 or
         otherwise provided by law.
         (b) In  addition,  Landlord  shall be entitled to retain as  liquidated
         damages all security  deposits made hereunder and any such alterations,
         improvements  or additions that Tenant may have annexed to the Premises
         that  cannot  be  removed  without  damage  thereto   (subject  to  the
         provisions of Article 14 above).

17. FORCE MAJEURE.
   17.1 If  either  party  to this  Lease  is  delayed  or  prevented  from  the
performance of any act required hereunder,  including,  without limitation, such
reasons as Acts of God, lockouts, labor strikes, inability to procure materials,
restrictive  governmental  laws,  ordinances or regulations,  or any other cause
which is beyond the control of the party obligated to perform,  then performance
shall be temporarily  excused until such time as performance  can be had without
such  restriction.  This shall not be  interpreted  as excusing  Tenant from the
prompt and timely payment of rentals or other charge(s) due under this Lease.

   17.2  Each  party  shall  use  reasonable  diligence  to avoid  any  delay as
described in Subparagraph 16.1 and shall resume  performance under this Lease as
promptly as possible after any such delay.

18. INSURANCE; INDEMNITY.

   18.1 Fire Insurance:
         (a) Landlord at its cost shall  maintain  during the term of this Lease
         on the  Premises a policy or  policies of  standard  fire and  extended
         coverage  insurance to the extent of at least  eighty (80%)  percent of
         full replacement value thereof. Said insurance policies shall be issued
         in the names of Landlord and Tenant, as their interests may appear.
         (b) Tenant, at its own expense,  shall maintain during the term of this
         Lease a  policy  of  standard  fire  and  extended  coverage  /casualty
         insurance,  with vandalism and malicious mischief endorsements,  to the
         extent of full replacement value insuring Tenant against loss or damage
         by fire or other casualty to all Tenant's personal property , including
         alterations  in or about the  Premises and Tenant  Improvements  for/of
         Tenant located in the Premises. The proceeds from any such policy shall
         be used by Tenant for the  replacement  of  personal  property  and the
         restoration of Tenant's improvements or alterations.

    18.2 Liability Insurance:
         (a) Tenant at its sole cost and expense shall maintain  during the term
         of this Lease a general  public  liability  insurance  policy to insure
         against  all  liability  of Tenant and its  authorized  representatives
         arising out of and in connection  with Tenant's use or occupancy of the
         Premises.  The single combined  liability  limitation of such insurance
         shall be not less than: Five hundred thousand  ($500,000)  Dollars with
         respect to injury or death of one  person,  and Five  hundred  thousand
         ($500,000) Dollars with respect to any one accident, and Fifty thousand
         ($50,000) Dollars with respect to property damage,  including theft and
         a special rider  regarding  plate glass  windows,  if the normal policy
         does not already cover this item. Landlord shall be named as additional
         insured  under said policy but only with respect to claims  against the
         Landlord  arising  solely out of the Tenant's use and  occupancy of the
         Property.  Tenant,  upon separate written request from Landlord,  shall
         furnish a certificate evidencing said insurance.
         (b) If Tenant  fails to maintain  insurance,  Landlord  may procure and
         maintain  such  policies  at the  expense  and cost of Tenant,  bearing
         interest thereon at the maximum rate permitted by law for an individual
         to charge,  and which shall be due and payable as additional  rental to
         Landlord together with Tenant's next rental installment.

   18.3  Waiver of  Subrogation.  Tenant and  Landlord  each  waives any and all
rights of  recovery  against  the other,  or against  the  officers,  employees,
agents, and  representatives of the other, for loss of or damage to such waiving
party or its property or the  property of others  under its control,  where such
loss or damage is insured  against  under any  insurance  policy in force at the
time of such loss or  damage.  Each party  shall  cause  each  insurance  policy
obtained  hereunder to provide that the  insurance  company  waives all right of
recovery by way of  subrogation  against  either  party in  connection  with any
damage covered by any such policy.

    18.4 Hold Harmless.
         (a) Tenant shall indemnify and hold Landlord  harmless from and against
         any and all claims arising from:
                  (1)  Tenant  use or  occupancy  of the  Premises,  or (2)  the
                  conduct of Tenant's business, or (3) from any activity,  work,
                  or things  which may be  permitted or suffered by Tenant in or
                  about the Premises  including all damages,  costs,  attorney's
                  fees, expenses and liabilities  incurred in the defense of any
                  claim or action or proceeding arising therefrom.
         (b) Except for Landlord's willful or grossly negligent conduct,  Tenant
         hereby assumes all risk of damage to property or injury to person in or
         about the Premises  from any cause and Tenant  hereby waives all claims
         in respect thereof against Landlord.

                                      E-8
<PAGE>

    18.5 Exemption of Landlord from Liability.
         (a) Except for Landlord's willful or grossly negligent conduct,  Tenant
         hereby agrees that Landlord shall not be liable for:
                  (1)  Any  injury  to  Tenant's  business  or  loss  of  income
                  therefrom, or (2) damage to the goods, wares, merchandise,  or
                  other  property of Tenant,  or (3) injury to Tenant's  person,
                  employees, invitees, customers or any other person in or about
                  the  Premises  whether  such  damage or injury is caused by or
                  results from fire, water or rain, steam, electricity,  or from
                  the breakage, leakage,  obstruction or other defects of pipes,
                  sprinklers, wires, appliances,  plumbing air-conditioning,  or
                  lighting  fixtures or from any other cause whether such damage
                  results  from  conditions  arising  upon the  Premises or upon
                  other  portions of the  building in which the  Premises  are a
                  part, or from any other sources or places.
         (b) Landlord shall not be liable to Tenant for any damages arising from
         any act or neglect of any other  tenant,  if any,  of the  building  in
         which the Premises are located.

19. DAMAGE OR DESTRUCTION.
   19.1 Damage - Insured.
         (a) If the Premises and/or the building and other improvements in which
         the Premises are located are totally or partially  destroyed  rendering
         the Premises  totally or partially  inaccessible or unusable,  and such
         damage  or  destruction  was  caused  by a  casualty  covered  under an
         insurance  policy required to be maintained  hereunder,  Landlord shall
         restore the  Premises  and/or the building  and other  improvements  in
         which the Premises are located into substantially the same condition as
         they were in immediately  before such damage or  destruction,  provided
         that the  restoration  can be made under the  existing  laws and can be
         completed  within one hundred  twenty (120) working days after the date
         of such destruction of damage.
                  (1) Such destruction or damage shall not terminate this Lease.
                  (2) If the  restoration  cannot be made  within  said  120-day
                  period,  then Tenant may terminate  this Lease within  fifteen
                  (15) days of such a determination by giving notice to Landlord
                  and the Lease will be deemed  canceled  as of the date of such
                  damage or  destruction.  (3) If Tenant fails to terminate this
                  Lease and the  restoration  is permitted  under existing laws,
                  Landlord,  at its option,  may terminate this Lease or restore
                  the  Premises  and/or  any  other  improvements  in which  the
                  Premises are located  within a reasonable  time and this Lease
                  shall continue in full force and effect.  (4) If existing laws
                  do not permit  restoration,  either party can  terminate  this
                  Lease immediately by giving notice to the other party.
         (b)  Notwithstanding  the above, if Tenant is the insuring party and if
         the insurance  proceeds  received by the Landlord are not sufficient to
         effect such repair,  Landlord shall give notice to Tenant of the amount
         required in addition to the insurance proceeds to effect such repair.
                  (1) Tenant may, at Tenant's  option,  contribute  the required
                  amount,  but upon  failure  to do so within  thirty  (30) days
                  following  such  notice,  Landlord's  sole remedy shall be, at
                  Landlord's  option and with no liability to Tenant,  to cancel
                  and  terminate  this  Lease.  (2) If Tenant  contributes  such
                  amount  to  Landlord  within  said  thirty  (30)  day  period,
                  Landlord  shall  make  such  repairs  as  soon  as  reasonably
                  possible  and this  Lease  shall  continue  in full  force and
                  effect.   Tenant   shall  in  no  event   have  any  right  to
                  reimbursement for any amount so contributed.

   19.2 Damage - Uninsured.
         (a) If the Premises are damaged or destroyed by a casualty which is not
         covered by the fire and extended  coverage  insurance which is required
         by Article 18, then Landlord shall restore the same, at Landlord's sole
         expense,  on the contingency that if the damage or destruction is to an
         extent  greater than ten (10%) percent of the  replacement  cost of the
         improvements  on  the  property  on  which  the  Premises  are  located
         (exclusive  of Tenant's  trade  fixtures and equipment and exclusive of
         foundations  and footings),  then Landlord may elect not to restore and
         to terminate this Lease.
         (b) Landlord  shall provide Tenant with written notice of its intention
         not to restore and  terminate  this Lease within  thirty (30) days from
         the date of such  damage or  destruction  and,  if not given,  Landlord
         shall be deemed to have  elected  to restore  and in such  event  shall
         repair any damage as soon as reasonably possible.
         (c) If Landlord elects to cancel and terminate this Lease, Tenant shall
         have the right,  within ten (10) days after receipt of such notice,  to
         give  written  notice to  Landlord  of  Tenant's  intent to repair such
         damage at Tenant's expense,  without  reimbursement from Landlord.  The
         Lease  shall  continue  in full force and effect and Tenant  shall make
         such repairs as soon as  reasonably  possible.  If Tenant does not give
         said  notice  within  such ten (10) day  period,  this  Lease  shall be
         canceled and be deemed  terminated as of the date of the  occurrence of
         such damage or destruction.

   19.3 Damage Near the End of Term.
         (a) If the  Premises  are  totally or  partially  destroyed  or damaged
         during the last twelve (12) months of the term of this Lease.  Landlord
         may, at Landlord's  option,  cancel and terminate  this Lease as of the
         date of the cause of such damage by giving  written notice to Tenant of
         Landlord's  election to do so within thirty (30) days after the date of
         the  occurrence  of such damage.  If the damage or  destruction  occurs
         within the last twelve  (12)  months of the term and if within  fifteen
         (15) days after the date of such damage or destruction Tenant

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         exercises  any option to extend the term,  Landlord  shall  restore the
         Premises if obligated to do so as provided in Subparagraph 19.1 or 19.2
         above.

    19.4 Abatement of Rent.
         If the Premises are  partially  destroyed or damaged , the rent payable
hereunder  for the  period  during  which  such  damage,  repair or  restoration
continues  shall be  abated  in  proportion  to the  degree  to  which  Tenant's
reasonable use of the Premises is impaired. Except for the abatement of rent, if
any,  Tenant shall have no claim  against  Landlord for any damages  suffered by
reason of any such damage, destruction, repair or restoration.

    19.5 Trade Fixtures and Equipment.
         If Landlord  is required or elects to restore the  Premises as provided
in  this  Article  19,  Landlord  shall  not be  required  to  restore  Tenant's
improvements,  trade  fixtures,  equipment or alterations  made by Tenant,  such
excluded items being the sole responsibility of Tenant to restore hereunder.

    19.6 Total Destruction - Multitenant Building.
         If the  Premises  are a part of a  multitenant  building  and  there is
destruction to the Premises and/or the building of which the Premises are a part
that exceeds fifty (50%) percent of the then  replacement  value of the Premises
and/or the building in which the  Premises are a part from any cause  whether or
not covered by the insurance  described in Article 18 above,  Landlord may elect
to terminate  this Lease  (whether or not the Premises are destroyed) so long as
Landlord terminates the leases of all other tenants in the building of which the
Premises are a part, effective as of the date of such damage or destruction.

20. CONDEMNATION.
   20.1 If the Premises or any part  thereof,  or if the  properties of Landlord
including the Premises or any part thereof, shall be the subject of condemnation
by any  governmental  or any other  authority  lawfully  exercising the right of
eminent  domain,  Landlord may terminate this Lease with respect to such part of
the Premises  condemned  and Tenant shall not be entitled to receive any part of
any condemnation award in connection therewith.

21. ASSIGNMENT AND SUBLETTING.
   21.1 Tenant shall not  voluntarily  or by operation of law assign,  transfer,
sublet,  share,  mortgage,  or otherwise transfer or encumber all or any part of
Tenant's  interest in this Lease or in the  Premises  without  Landlord's  prior
written  consent  which  shall  not  be  unreasonably  withheld.  Any  attempted
assignment, sharing, transfer, mortgage, encumbrance, or subletting without such
consent shall be void and shall constitute a breach of this Lease.

   21.2  Regardless of  Landlord's  consent,  no subletting or assignment  shall
release  Tenant or Tenant's  obligation to pay the rent and to perform all other
obligations to be performed by Tenant hereunder for the term of this Lease.
         (a) The  acceptance of rent by Landlord from any other person shall not
         be deemed a waiver by Landlord of any provision hereof.
         (b) Consent to one assignment or subletting shall not be deemed consent
         to any subsequent assignment or subletting.
         (c) Tenant shall not accept  payment from nor allow any other person or
         entity to use the "Premises",  the "Building" or the "Common Areas" for
         the  purpose of  conducting  any type of  business  without  Landlord's
         specific prior written permission.

   21.3 As a condition to  Landlord's  prior  written  consent to  assignment or
subletting by Tenant of the entire  Premises,  Landlord shall have a first right
of retaking possession of the Premises or,  alternatively,  Tenant shall provide
Landlord with prior written verification of the terms and conditions of Tenant's
assignment or  subletting  with the assignee or sublessee and the rental for the
Premises  shall remain the same as that provided for in Article 5 above,  and as
further modified where appropriate by Article 6 and Article 7 above.

22:DEFAULT:

   22.1 Default. The occurrence of any one or more of the following events shall
constitute a material default and breach of this Lease by Tenant:
         (a)  Abandonment  and vacation of the  Premises  (failure to occupy the
         Premises  for  fourteen  (14)   consecutive  days  with  no  intent  of
         reoccupying shall be deemed an abandonment and vacation).
         (b) The vacating of the Premises  resulting in a cancellation of any of
         the insurance coverage provided in Article 18 hereof.
         (c) The  failure  by  Tenant to make any  payment  of rent or any other
         payment required to be made by Tenant hereunder, as and when due.
         (d) The failure by Tenant to observe or perform  any of the  covenants,
         conditions,  or provisions of this Lease to be observed or performed by
         Tenant,  other than those described in  subparagraph  22.1(c) above, if
         such failure  continues  for a period of thirty (30) days after written
         notice  thereof from  Landlord to Tenant  unless the nature of Tenant's
         failure is such that more than thirty (30) days are reasonably required
         for its  cure.  In such a case,  Tenant  shall  not be  deemed to be in
         default if Tenant  commences  such cure  within  said  thirty  (30) day
         period and thereafter diligently completes such cure.
          (e) Any of the following events:

                                      E-10
<PAGE>

                  (1) The making by Tenant of any general  assignment or general
                  arrangement for the benefit of creditors, or (2) the filing by
                  or against  Tenant a petition  to have  Tenant  adjudicated  a
                  bankrupt or a petition  for  reorganization  or  rearrangement
                  under any law relating to bankruptcy  unless, in the case of a
                  petition filed against  Tenant,  the same is dismissed  within
                  thirty  (30)  days,  or (3) the  appointment  of a trustee  or
                  receiver to take possession of  substantially  all of Tenant's
                  assets located at the Premises or of Tenant's interest in this
                  Lease,  where  possession  is not  restored  to Tenant  within
                  thirty (30) days,  or (4) the  attachment,  execution or other
                  judicial  seizure  of  substantially  all of  Tenant's  assets
                  located at the Premises or of Tenant's interest in this Lease,
                  where such seizure is not discharged within thirty (30) days.

         Note: If a court of competent  jurisdiction  determines that any of the
foregoing acts of  subparagraph  21.1(e) does not constitute an event of default
under the terms of this Lease,  and a trustee is appointed to take possession of
Tenant's  interest  under this Lease (or Tenant  remains a debtor in possession)
and such trustee or Tenant  assigns or subleases  Tenant's  interest  hereunder,
then Landlord shall receive, as additional rent, the difference between the rent
or any other  consideration  paid in connection with such assignment or sublease
and the rent payable by Tenant hereunder.  This Lease and any interest in and to
the Premises shall not become an asset of any  proceedings  described  above and
Landlord  shall be entitled to exercise any one or more of the remedies  defined
in paragraph 21.2 .

   22.2  Remedies.  Landlord  shall be entitled to exercise any of the following
remedies if Tenant  commits a default under this Lease.  These  remedies are not
exclusive  but are  cumulative  and in addition to any remedies now or hereafter
allowed by law.

         (a) Landlord can continue this Lease in full force and effect,  and the
         Lease will  continue in effect so long as Landlord  does not  terminate
         Tenant's  right to possession  and the Landlord shall have the right to
         collect rent when due.
                  (1) During the period that Tenant is in default,  Landlord can
                  enter the  Premises  and relet them,  or any part of them,  to
                  third parties for Tenant's account.
                  (2) Tenant  shall be liable  immediately  to Landlord  for all
                  costs  Landlord  incurs in reletting the premises,  including,
                  without   limitation,   brokers'   commissions,   expenses  of
                  remodeling the Premises  required by the  reletting,  and like
                  costs.
                  (3) Reletting  can be for a period  shorter or longer than the
                  remaining  term of this Lease.  Tenant  shall pay Landlord the
                  rent due under this  Lease on the dates the rent is due,  less
                  the rent Landlord receives from any reletting.
                  (4) No act by Landlord under this  Subparagraph  22.2(a) shall
                  terminate  this Lease  unless  Landlord  notifies  Tenant that
                  Landlord elects to terminate this Lease.
                  (5) After Tenant's default and for so long as Landlord has not
                  terminated  Tenant's  right to possession of the Premises,  if
                  Tenant obtains Landlord's consent, Tenant shall have the right
                  to assume or sublet  its  interest  in the  Lease,  but Tenant
                  shall  not be  released  from  liability.  Landlord's  consent
                  hereunder shall not be unreasonably withheld.
                  (6) If  Landlord  elects to relet the  Premises as provided in
                  this  Subparagraph  22.2(a),  any rent that Landlord  receives
                  shall  apply  first to the  payment of any  indebtedness  from
                  Tenant  to  Landlord  other  than the rent due from  Tenant to
                  Landlord;  secondly,  to  all  costs,  including  maintenance,
                  incurred by Landlord in such reletting; and third, to any rent
                  due and unpaid under this Lease.
                  (7)  After   deducting  the  payments   referred  to  in  this
                  Subparagraph 22.2(a), any sum remaining from the rent Landlord
                  receives  from such  reletting  shall be held by Landlord  and
                  applied in payment of future  rent as rent  becomes  due under
                  this Lease. In no event shall Tenant be entitled to any excess
                  rent received by Landlord.
                  (8) If,  on the date rent is due under  this  Lease,  the rent
                  received  from the reletting is less than the rent due on that
                  date,  Tenant  shall  pay  to  Landlord,  in  addition  to the
                  remaining  rent due, all costs,  including  maintenance,  that
                  Landlord  shall have  incurred in reletting  that remain after
                  applying the rent  received  from the reletting as provided in
                  this Subparagraph 22.2(a).

         (b) Landlord can, at its option, terminate Tenant's right to possession
         of the  Premises at any time.  No act by Landlord  other than by giving
         written  notice  to  Tenant  shall   terminate  this  Lease.   Acts  of
         maintenance,  efforts to relet the Premises,  of the  appointment  of a
         receiver on  Landlord's  initiative to protect  Landlord's  interest in
         this Lease shall not  constitute  a  termination  of Tenant's  right to
         possession. In the event of such a termination,  Landlord has the right
         to recover from Tenant:
                  (1) The worth,  at the time of the award,  of the unpaid  rent
                  that had been  earned at the time of the  termination  of this
                  Lease.
                  (2) The  worth,  at the time of the  award,  of the  amount by
                  which the unpaid  rent that would have been  earned  after the
                  date of the  termination  of this Lease  until the time of the
                  award  exceeds  the  amount  of the loss of rent  that  Tenant
                  proves could have been reasonably avoided.
                  (3) The  worth,  at the time of the  award,  of the  amount by
                  which the  unpaid  rent for the  balance of the term after the
                  time of the award  exceeds the amount of the loss of rent that
                  Tenant proves could have been reasonably avoided, and
                  (4) Any other  amount,  including  court  costs,  necessary to
                  compensate  Landlord for all detriment  proximately  caused by
                  Tenant's default.

         Note:  "The  worth at the time of the  award" as used in (1) and (2) of
this  paragraph  is to be computed by allowing  interest at the maximum  rate an
individual  is permitted by law to charge.  "The worth at the time of the award"
as referred to in (3) of this  paragraph  is to be computed by  discounting  the
amount at the discount rate of the Federal  Reserve Bank of San Francisco at the
time of the award, plus one (1%) percent.

         (c) Landlord at any time after Tenant  commits a default,  can cure the
         default at Tenant's  cost and  expense.  If  Landlord  at any time,  by
         reason of Tenant's default,  pays any sum or does any act that requires
         the  payment  of any  sum,  the  sum  paid  by  Landlord  shall  be due
         immediately from Tenant to Landlord at the time the sum is paid, and if
         paid at a  later  date  shall  bear  interest  at the  maximum  rate an
         individual  is permitted by law to charge from the date the sum is paid
         by Landlord until Landlord is reimbursed by Tenant.  The sum,  together


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<PAGE>
         with interest thereon, shall be considered additional rent and shall be
         payable as such.

         (d) Landlord can cure Tenant's default at any time at the Tenant's cost
         and expense. If Landlord,  by reason of Tenant's default,  pays any sum
         or does any act that  requires  the payment of any sum, the sum paid by
         the  Landlord  shall be due from  Tenant  within  three  (3) days  from
         written  notice to Tenant Any unpaid  sum shall  bear  interest  at the
         maximum rate an  individual is permitted to charge by law from the date
         the sum is paid by the Landlord until the date the sum is reimbursed by
         Tenant. The sum,  including  interest,  shall be considered  additional
         rent and shall be payable as such.

         (e) If Tenant is in  default,  and has not cured  such  default  within
         thirty (30) days, then Landlord shall be entitled to demand and receive
         back  from  Tenant  reimbursement  for any free rent  already  credited
         Tenant.  Any future free rent indicated in the Lease agreement shall be
         null and void.

   22.3  Default by Landlord.

         (a) Landlord shall not be in default  unless  Landlord fails to perform
         its obligations  within thirty (30) days after written notice by Tenant
         to Landlord  specifying  which  obligation  (s)  Landlord has failed to
         perform.
         (b) If the  nature of the  specified  obligation  (s) is such that more
         than thirty (30) days are  reasonably  required to complete their cure,
         then  Landlord  shall not be in default if it  commences to cure within
         said thirty (30) day period and  thereafter  diligently  prosecutes the
         same to completion.

    22.4 Late Charges.

         (a) Tenant acknowledges that late payment by Tenant to Landlord of rent
         or other sums due  hereunder  will cause  Landlord  to incur  costs not
         contemplated  by  this  Lease,  the  exact  amount  of  which  will  be
         impracticable or extremely difficult to ascertain.

         (b) Such costs  include,  but are not  limited to: (1)  processing  and
         accounting  charges,  and (2) late  charges  which  may be  imposed  on
         Landlord  by the  terms of any  mortgage  or trust  deed  covering  the
         Premises.

         (c) If any  installment of rent or any sum in addition to rent due from
         Tenant is not received by Landlord  within five (5) days after the date
         such amount is due,  Tenant  shall pay to Landlord a late charge of ten
         (10%)  percent of total  monthly rent The parties  agree that such late
         charge represents a fair and reasonable  estimate of the costs Landlord
         will incur by reason of late payment by Tenant.

         (d) All sums of money payable by Tenant to Landlord  hereunder shall be
         deemed rent for use of the Premises and  collectible  by Landlord  from
         Tenant as rent,  and shall be due from  Tenant to Landlord on the lease
         due date following the month when the late payment occurred.

23. SIGNS AND AUCTIONS.

   23.1 Tenant  shall not have the right to place,  construct,  or maintain  any
sign,  advertising,  awning,  banner, or other exterior decorations,  lights, or
sound  devices  on the  building  or other  improvements  that are a part of the
Premises without  Landlord's  prior written consent,  which consent shall not be
unreasonably withheld, subject to local ordinances. Tenant further agrees not to
conduct or permit to be  conducted  any sale by auction  in,  upon,  or from the
Premises,  whether  said  auction be  voluntary,  involuntary,  pursuant  to any
assignment for the payment of creditors,  or pursuant to any bankruptcy or other
solvency proceeding.

24. PARKING AND COMMON FACILITIES.

   Landlord  covenants to provide an area for Tenant's use for parking  pursuant
to the following provisions:

   24.1 Tenant shall have the  non-exclusive  right to use for Tenant's benefit,
its agents, employees, customers, licensees and subtenants, the parking area and
common facilities in conjunction with Landlord, other present and future owners,
tenants and their agents, employees, customers, licensees and sub-tenants during
the entire term of this Lease, or any extension hereof,  for ingress and egress,
roadway,  sidewalk  and  automobile  parking  which are provided for in existing
covenants,  conditions and  restrictions  of record.  Said parking area shall be
used for parking by vehicles not larger than full size passenger cars or pick up
trucks.  Prohibited vehicles are not permitted:  examples of prohibited vehicles
shall  include  but not be  limited  to trucks,  trucking  equipment,  trailers,
campers,  boats,  recreational  vehicles,  non-operational  vehicles or vehicles
parked longer than 48 hours. No automotive  repair/service is allowed.  Landlord
shall have the right , without notice,  in addition to other rights and remedies
it may have,  to remove or tow away the vehicle  involved,  and the Tenant shall
pay all costs involved to Landlord immediately upon demand.

   24.2 The  condemnation  or other taking by any public  authority,  or sale in
lieu of condemnation,  of any or all of such common facilities and parking areas
shall not constitute a violation of this Article 24.

   24.3  Landlord  reserves the right to change the  entrances,  exits,  traffic
lanes,  and the  boundaries  and  locations of such parking  area(s);  provided,
however, that anything to the contrary notwithstanding contained in this Article
22, said parking area(s) shall at all times be substantially  equivalent to that
shown on the attached Exhibit "A".

   24.4 Landlord shall keep said automobile  parking and common areas in a neat,
clean and orderly condition,  properly lighted and landscaped,  and shall repair
any damage to the facilities thereof.

   24.5 Tenant, in the use of the parking area(s) and common facilities,  agrees
to comply with such  reasonable  rules and regulations as the Landlord may adopt
from time to time for their orderly and property operation.

                                      E-12
<PAGE>



25. EARLY POSSESSION.

   25.1  If  Landlord  permits  Tenant  to  occupy  the  Premises  prior  to the
commencement  date of the term of this Lease, such occupancy shall be subject to
all the  provisions  of this  Lease.  Early  possession  shall not  advance  the
termination date of this Lease.

26. SUBORDINATION.

   26.1 This Lease,  at Landlord's  option,  shall be subordinated to any ground
lease,  mortgage,  deed of trust, or any other hypothecation for security now or
hereafter  placed upon the real property of which the Premises are a part and to
any  and  all  advances  made  on the  security  thereof  and  to  all  renewal,
modifications, and extensions thereof.

   26.2  Notwithstanding  any  such  subordination,   Tenant's  right  to  quiet
possession  of the  Premises  shall not be disturbed if Tenant is not in default
and so long as Tenant  shall pay the rent and  observe and perform all the other
provisions of this Lease, unless this Lease is otherwise  terminated pursuant to
its terms.

   26.3 If any  mortgagee,  trustee,  or ground  lessor shall elect to have this
Lease  prior to the lien of its  mortgage  or deed of trust or ground  lease and
shall give written notice thereof to Tenant, this Lease shall be deemed prior to
such mortgage,  deed of trust or ground lease, whether this Lease is dated prior
to or subsequent to the date of such mortgage, deed of trust or ground lease, or
the date of recording thereof.

   26.4  Tenant  agrees  to  execute  any  documents  required  to  effect  such
subordination  or to make this Lease prior to the lien of any mortgage,  deed of
trust, or ground lease, as the case may be, and failing to do so within ten (10)
days after  written  demand from  Landlord  does  hereby  make,  constitute  and
irrevocably appoint Landlord as Tenant's attorney in fact and in Tenant's name ,
place and stead to do so.

27. SURRENDER.

   27.1 On the last day of the term of this Lease, or on any sooner termination,
Tenant shall surrender the Premises to Landlord in good condition,  broom clean,
ordinary wear and tear accepted.
         (a) Tenant shall repair any damage to the  Premises  occasioned  by its
         use thereof, or by the removal of Tenant's trade fixtures,  furnishings
         and  equipment  which repair shall  include the patching and filling of
         holes and repair of structural damage.
         (b) Tenant shall  remove all of its  personal  property and fixtures on
         the Premises prior to the expiration of the term of this Lease,  and if
         required by Landlord,  pursuant to Article 14 above,  any  alterations,
         improvements, or additions made by Tenant to the Premises.

   27.2  Landlord  may,  at its  option,  apply the  provisions  of Article 8 in
covering the costs  relative to Tenant's  failure to adhere to the provisions of
this Article 27.

   27.3 If Tenant fails to surrender the Premises to Landlord on the  expiration
of the Lease as required by this paragraph,  Tenant shall hold Landlord harmless
from all  damages  resulting  from  Tenant's  failure  to vacate  the  Premises,
including,  without  limitation,  claims made by any succeeding tenant resulting
from Tenant's failure to surrender the Premises.

28. HOLDING OVER.

   28.1 If Tenant  remains in  possession  of the  Premises or any part  thereof
after the  expiration  of the term hereof  without  express  written  consent of
Landlord,  such occupancy  shall be a tenancy from month to month at a rental in
the amount of one hundred  twenty-five  percent  (125%) of the last monthly rent
installment, plus all other additional rent and other charges payable hereunder,
and upon all the terms hereof applicable to a month-to-month tenancy.

29. BINDING ON SUCCESSORS AND ASSIGNS.

   29.1 The terms, conditions, and covenants of this Lease shall be binding upon
and shall  inure to the  benefit of each of the  parties  hereto,  their  heirs,
personal representatives, successors and assigns.

30. LANDLORD'S RIGHT TO INSPECTION.

   30.1 Landlord and Landlord's agent shall have the right to enter the Premises
at reasonable  times,  with Tenants  permission  which shall not be unreasonably
withheld,  and also which  shall be  provided  within a 24 hour period , for the
purpose of:
         (a) inspecting the Premises,
         (b) showing the Premises to prospective purchasers or lenders, and
         (c) making such alterations,  repairs, improvements or additions to the
         Premises  or to the  building  of  which  the  Premises  are a part  as
         Landlord may deem  necessary or  desirable.  (d) Landlord may enter the
         Premises without prior notification in cases of emergency.

   30.2  Landlord  may at any time place on or about the  Premises  any ordinary
"For Sale" signs and Landlord may at any time during the last one hundred twenty
(120) days of the term of this Lease place on or about the Premises any ordinary
"For Sale or Lease" signs, all without rebate of rent or liability to Tenant.

31. CHOICE OF LAW.

    31.1 This Lease shall be governed by the laws of the State of California.

                                      E-13
<PAGE>

32. ATTORNEY'S FEES.

   32.1 If either  Landlord  or  Tenant  becomes  a party to any  litigation  or
arbitration  concerning  this  Lease,  the  Premises,  or the  building or other
improvements in which the Premises are located, by reason of any act or omission
of the other party or its authorized representatives,  the losing party shall be
liable to the prevailing party for reasonably attorney's fees and costs of suit.

33. LANDLORD'S LIABILITY.

   33.1 The term  "Landlord"  as used in this Lease shall mean only the owner or
owners  at the  time in  question  of the fee  title,  and in the  event  of any
transfer of such title,  Landlord  herein named shall be relieved from and after
the date of such transfer of all liability in respect to Landlord's  obligations
thereafter  to be  performed.  The  obligations  contained  in this  Lease to be
performed  by  Landlord  shall be binding  upon the  Landlord's  successors  and
assigns, only during their respective periods of ownership.

34. WAIVERS.

   34.1 No waiver by Landlord of any  provision  hereof shall be deemed a waiver
of any other provision hereof or of any subsequent  breach by Tenant of the same
or any other provision.

   34.2  Landlord's  consent  to or  approval  of any act shall not be deemed to
render  unnecessary  the obtaining of  Landlord's  consent to or approval of any
subsequent act by Tenant.

   34.3 The  acceptance of rent  thereunder by Landlord shall not be a waiver of
any preceding breach by Tenant of any provision  hereof,  other than the failure
of Tenant to pay the  particular  rent so  accepted,  regardless  of  Landlord's
knowledge of such preceding breach at the time of its acceptance of such rent.

35. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS.

   35.1 This Lease  contains all  agreements  of the parties with respect to any
matter mentioned herein. No prior agreements or understandings pertaining to any
such matter  shall be  effective.  This Lease may be  modified in writing  only,
signed  by the  parties  in  interest  at the time of  modification.  Any  other
attempted modification of this Lease shall be void.

36. TIME.

   36.1 Time is of the essence of this Lease.

37. SEVERABILITY.

   37.1 The unenforceability, invalidity, or illegality of any provision of this
Lease shall not render the other provisions hereof  unenforceable,  invalid,  or
illegal.

38. ESTOPPEL CERTIFICATES.

   38.1 Each  party,  within five (5) days after  notice  from the other  party,
shall  execute and deliver to the other party a  certificate  stating  that this
Lease is unmodified and in full force and effect, or in full force and effect as
modified,  and stating the  modification.  This certificate shall also state the
amount  of  minimum  monthly  rent,  the  dates to which  rent has been  paid in
advance, and the amount of any security deposit or prepaid rent, if any, as well
as  acknowledging  that there are not, to that  party's  knowledge,  any incured
defaults on the part of the other party,  or specifying  such defaults,  if any,
which are claimed. Failure to deliver such a certificate within the five (5) day
period shall be conclusive  upon the party failing to deliver the certificate to
the benefit of the party  requesting the certificate  that this Lease is in full
force and effect,  that there are no incurred  defaults  hereunder,  and has not
been  modified  except  as  may  be  represented  by the  party  requesting  the
certificate.

39. COVENANTS AND CONDITIONS.

   39.1 Each provision of this Lease  performable by Tenant shall be deemed both
a covenant and a condition.

40. JOINT AND SEVERAL LIABILITY.

   40.1 "Party" shall mean  Landlord and Tenant,  and of more than one person or
entity is the Landlord or Tenant, the obligations  imposed on the party shall be
joint and several.

41. OPTION TO EXTEND.

   41.1  Provided  that  Tenant  shall  not then be nor has been  previously  in
default hereunder, Tenant shall have the option to extend the term of this Lease
for N/A  additional  N/A year  periods  upon  delivery  by Tenant to Landlord of
written  notice of its  election  to  exercise  such option at least one hundred
twenty (120) days prior to the expiration of the original term hereof.

   41.2 If Tenant  exercises  the  option  right as  described  above,  then the
parties  hereto  agree  that the terms and  conditions  of this  Lease  shall be
negotiable requiring written mutual consent of Landlord and Tenant.

42. BROKER'S FEE.

   42.1 The brokers involved in this  transaction are MJB  Investments,  Inc. as
"listing  broker" and MJB Investments  Inc., as "cooperating  broker",  licensed
real estate  broker(s).  A  "cooperating  broker" is defined as any broker other
than the listing broker entitled to a

                                      E-14
<PAGE>

share of any commission  arising under this Lease.  Upon execution of this Lease
by both parties, Landlord shall pay to said brokers jointly, or in such separate
shares  as they may  mutually  designate  in  writing,  a fee as set  forth in a
separate agreement between Landlord and said broker(s), or in the event there is
no separate  agreement  between  Landlord and said broker(s),  the sum of $ (per
agreement),  for brokerage  services  rendered by said  broker(s) to Landlord in
this transaction.

   42.2 Landlord  further agrees that (1) if Tenant  exercises any Option of the
Lease, which is granted to Tenant under this Lease, or any subsequently  granted
option which is substantially  similar to an Option granted to Tenant under this
Lease,  or (2) if Tenant  acquires any rights to the Premises of other  premises
described  in this Lease which are  substantially  similar to what Tenant  would
have acquired had an Option herein granted to Tenant been  exercised,  or (3) if
Tenant remains in possession of the Premises after the expiration of the term of
this Lease after having failed to exercise an Option,  or (4) if said  broker(s)
are the  procuring  cause of any other lease or sale  entered  into  between the
parties  pertaining  to the  Premises  and/or  any  adjacent  property  in which
Landlord  has an  interest,  or (5) if the Base Rent is  increased,  whether  by
agreement or operation of an escalation clause contained herein,  then as to any
of said transactions or rent increases, Landlord shall pay said broker(s) as fee
in  accordance  with the  schedule  of said  broker(s)  in effect at the time of
execution  of this  Lease.  Said fee  shall be paid at the time  such  increased
rental is determined.

   42.3 Landlord agrees to pay said fee not only on behalf of Landlord, but also
on behalf of any person,  corporation,  association,  or other entity  having an
ownership  interest in said real property or any part thereof,  when such fee is
due hereunder. Any transferee of Landlord's interest in this Lease, whether such
transfer is by agreement or by operation of law, shall be deemed to have assumed
Landlord's  obligation  under this paragraph 4.2 . Each listing and  cooperating
broker shall be a third part  beneficiary of the provisions of this paragraph 42
to the extent of their interest in any  commission  arising under this Lease and
may enforce that right directly against Landlord

43. ADDENDUM.

   43.1  Exhibits  "A",  "B", and "C" and Addendum to Standard  Office Lease are
incorporated  by reference  and may modify,  explain,  add to or delete from the
terms of this Lease.

   43.2 This shall be amended or modified only in writing and as acknowledged by
Landlord and Tenant

This Lease has been  prepared by GLM  Properties  at the request of the Landlord
and Tenant who are herein referred to as "The Parties"  without regard to gender
or number. The parties have been advised to have this document reviewed by their
own independent  counsel,  and confirm that in signing this document,  they have
not relied on any act or conduct of GLM Properties,  and its agents, with regard
to the  interpretations  or meanings of this document.  The Parties  jointly and
severally  waive any and all  claims,  actions,  demands,  and loss  against GLM
Properties,  its  agents  and each of them,  that a Party may incur by reason of
act,  error  or  omission  in  the  preparation  of  this  document  and  in its
interpretation and meaning,  whether or not the interpretation or meaning is the
result  of  Compromise   and  settlement   among  Parties,   or  the  result  of
determination  by Court or  arbitration  panel of  competent  jurisdiction.  The
proceeding  waiver provisions have been negotiated and agreed by and between the
parties on the one part and GLM Properties on the other part.

Unless dated  otherwise the parties  hereto have executed this Lease on the date
first above written.


LANDLORD: Executive Center of Simi Valley       TENANT : Perfectdata Corporation








By /s/ Albert La Monte Date 10/16/03         By /s/ Irene J. Marino Date 10/3/03
NAME PRINTED:     Albert LaMonte             NAME PRINTED:     Irene J. Marino


By /s/ Helen La Monte Date 10/16/03
NAME PRINTED:     Helen LaMonte

CONSULT YOUR ATTORNEY FOR ASSURANCE THAT YOUR RIGHTS ARE PROTECTED HEREUNDER. NO
REPRESENTATION   OR   RECOMMENDATION   IS  MADE  BY  LANDLORD,   ITS  AGENTS  OR
REPRESENTATIVES,  AS TO THE LEGAL  SUFFICIENCY OR EFFECT, OR TAX CONSEQUENCES OF
THIS DOCUMENT OR THE TRANSACTION RELATING THERETO.  THESE ARE QUESTIONS FOR YOUR
ATTORNEY.

                                      E-15
<PAGE>

PROJECT: Executive Center of Simi Valley

                              EXHIBIT "A" - PAGE 1




A. LEGAL DESCRIPTION:

ADDRESS: 1445 Los Angeles Avenue CITY, STATE: Simi Valley, California COUNTY:
Ventura



B: SITE PLAN / FLOOR PLAN:


intentionally left blank



                                      E-16

<PAGE>


                               EXHIBIT "B" -PAGE 1


                    PROJECT: Executive Center of Simi Valley

This  Addendum  is made  reference  to in Article 43 and is attached to and made
part of that  certain  printed  Lease  Agreement  "(Lease)"  entered into by and
between  ALBERT  AND  HELEN  LAMONTE,   ("LANDLORD")   Perfectdata   Corporation
,("TENANT") dated September 24,2003.

The promises,  covenants,  agreements and declarations made and set forth herein
are  intended  to and shall  have the same  force and  effect as if set forth at
length in the body of the Lease.  To the extent that any terms or  provisions of
the Addendum are  inconsistent  with any terms or provisions  of the Lease,  the
terms and provisions of the Addendum shall prevail and control for all purposes.
All capitalized terms used in the Addendum shall have the same meanings assigned
to them in the Lease, if any, unless otherwise specified in the Addendum.

A. OTHER PROVISIONS:

Tenant acknowledges  receipt of notice letter from the City of Simi Valley dated
June 1, 1992 regarding hazardous substance regulations. Such letter is delivered
with this  Lease  document,  but not made a part of same.  Tenant is  advised to
check with the controlling  governmental  agencies  related to his/her  business
operations.   Neither  Landlord  nor  their  agent(s)  make  any  representation
regarding  any  requirements,   including  parking,   that  the  City  or  other
governmental agencies might impose on Tenant's type of business.

B. JANITORIAL SERVICE

Landlord shall provide and pay for building standard  janitorial  service to the
Premises a minimum of three (3) days per week.

C: ROOF: Tenant shall obtain Landlord's prior permission before  commencement of
any  work  anticipated  on the roof .  Tenant  shall  not make any  alterations,
improvements, installations, additions to or placements of utilities or antennas
upon the roof without  Landlord's  written  permission.  Should  Tenant make any
alterations, etc., without written consent, Landlord may require that Tenant, at
Tenant's obligation and expense, remove any or all of the same and additionally,
Tenant  shall pay to the Landlord the amount of any damage to the roof caused by
Tenant or Tenant's actions, or, Landlord may remove same at Tenant's expense.

D: DESCRIPTION OF WORK:

LANDLORD: N/A. The suite is in clean and deliverable condition.

TENANT:  1)Tenant  shall ,  contract  for,  construct,  maintain  and repair any
interior  improvements and decorations  including wiring and lighting  fixtures,
telephone and computer line installations, subject to Landlord's obligations set
forth in Article 12.  Tenant shall submit any  structural  modifications  to the
Landlord  for  Landlord's   approval  prior  to  any  actual   construction   or
modification of the existing  improvements to the Premises.  Such approval shall
not be unreasonably  withheld.  Tenant agrees to hold harmless  Landlord for any
claims  against  Landlord for any reason  whatsoever in connection  with Tenants
improvements  and  agrees to prevent  any third  party  claims or liens  against
Landlord in connection with Tenants improvements.  Additionally, Tenant has been
advised that Landlord  reserves the right to require  Landlord's  contractors to
perform  any  construction  work that  requires  modification  to the  Buildings
heating, air conditioning, plumbing or electrical systems. Any space planners or
consultants used by Tenant shall be at Tenant's choice, cost and obligation.  2)
Signage  requirements  per this Lease  agreement to be completed  and  installed
within thirty (30) days from the beginning of the Lease term.

Accordingly,  GLM  Properties  request  Tenant to sign this document  confirming
his/her  understanding of this policy and that neither GLM Properties nor Tenant
are relying on prior  discussions,  representations,  advertising  or  otherwise
which have not been set out in this Lease.

                                            Perfectdata Corporation


By /s/ Albert La Monte     Date 10/16/03    By /s/ Irene J. Marino Date 10/3/03
       ALBERT LAMONTE                              TENANT

By /s/ Helen La Monte     Date 10/16/03
       HELEN LAMONTE

                                      E-17
<PAGE>


                              EXHIBIT "C" - PAGE 1




This  addendum  is made  reference  to in Article 41 (NNN) or 42 (GROSS) of this
Lease and may modify, alter, or delete from the terms of the Lease.

A. DEPOSIT MONIES:  Upon execution of the final Lease  Documents,  the following
monies shall be due and payable as follows:

                   (1) First Months Rent                         $ 950.00
                   (2) Security Deposit:                         $ 950.00

    TOTAL MONIES DUE UPON EXECUTION:                            $ 1,900.00

B. TENANT AS  PRINCIPAL:  Tenant agrees that this Lease is submitted to Landlord
through GLM Properties  (Broker) who is the procuring  cause of this Lease,  and
that Tenant is acting as principal in this  transaction and is represented by no
other person  entitled to make demand upon Broker or Landlord for any commission
or part thereof that may by payable by Landlord to Broker.

C. SIGN AND AUCTIONS (ADDENDUM TO ARTICLE 22): Tenant acknowledges  receipt of a
copy of  Landlord's  "Tenant's  Identification  Policy" and does hereby agree to
abide by the same.  Said  addendum  is labeled  as  Exhibit  "C" - Page 3 and is
attached hereto.

D.  TENANT  IMPROVEMENTS:  Tenant is aware  that  completion  of any  additional
improvements  or changes  not  covered in the basic Lease shall in no way effect
the  commencement  of rent  payments  or any other terms or  conditions  of this
Lease.

E. Tenant's business hours shall be a minimum of -n/a-.

F.  GUARANTEE  OF LEASE:  Tenant  acknowledges  receipt of a copy of  Landlord's
Guarantee of Lease attached hereto. G. OTHER PROVISIONS:

   1)  Notwithstanding  any of the  provisions  in the  attached  Master  Lease,
Landlord  herein  agrees to pay  Tenant's  pro rata  share of (1) Real  Property
Taxes, (2) common area insurance, and (3) common area maintenance. If Landlord's
payment of these  expenses  for any  calendar  year after the base year  exceeds
those paid or incurred for the base year, then the Tenant shall pay its pro rata
share of such  increase  within ten (10) days of the notice  from the  Landlord.
Adjustment is based upon the increase in expenses  over the base year.  Tenant's
premises  consists of 1.68% of the total square footage of the building of which
the Premises comprise a part.

   2) Landlord  agrees,  at Landlord's  obligation  and expense,  to provide the
Building standard Janitorial Service for the Tenant's demised premises three (3)
days per week

   3) Tenant shall be responsible  for providing his own telephone  installation
and service.

                                      E-18
<PAGE>




                              EXHIBIT "C" - PAGE 2
                    PROJECT: Executive Center of Simi Valley




A. DIRECTORY:

   Landlord  shall  provide at no expense  to Tenant one (1)  building  standard
Tenant  directory  frame located in the main lobby which  identifies the company
name and suite number of all Tenants.  All directory strips within the directory
frame shall be installed  at Tenant's  expense and shall  conform to  Landlord's
requirements for uniformity in size, color, letter style, letter size and letter
color.

B. DIRECTORY STRIP:

   Tenant shall install at Tenant's expense one (1) building standard  directory
   strip which conforms to the following requirements:
         STRIP SIZE: 7/8" tall x 8-3/4" wide.
         BACKGROUND COLOR: 1/16" thick clear, non-glare acrylic with sub-surface
         painted building standard "bronze".
         LETTER AND NUMBER COLOR: Building standard screen-printed "white".
         LETTER AND NUMBER STYLE:  Building  standard  "Optima Bold",  upper and
         lower case. LETTER AND
         NUMBER SIZE: 1/2" tall.

C. TENANT SIGN FRAMES:

   Landlord shall install at no expense to Tenant one (1) building standard sign
frame for each allowed  corridor or main lobby door.  Tenant sign frame shall be
constructed of anodized aluminum "duranodic bronze",  10" tall x 10" wide x 1/2"
deep,  with 5/8 radius corners OR according to Building  standard,  whichever is
currently in use.

   Tenant  sign frame  shall be  centered  left to right on the  active  leaf of
corridor doors,  57" from the floor.  Tenant sign frames shall be  wall-mounted,
20" from the active leaf of main lobby glass doors, 57" from the floor.

D. TENANT SIGN PLAQUES:

   Tenant shall install at Tenant's expense one (1) building standard sign frame
per Tenant sign frame provided by Landlord. Tenant sign plaques shall conform to
the following requirements:
         PLAQUE SIZE: 9-1/4" wide x 9-1/4" tall.
         PLAQUE  COLOR:  Building  standard  1/16"  clear,   non-glare  acrylic,
         sub-surface painted building standard "bronze".
         LETTER AND NUMBER COLOR:  Building standard  sub-surface screen printed
         "white".
         LETTER AND NUMBER STYLE: Building standard "Optima Bold".
         LETTER AND NUMBER SIZE: Letters: 5/8" tall. Numbers: 1-1/2" tall.
         COMPANY  LOGOS ON SIGN  PLAQUES:  Size and color  subject to Landlord's
         written approval prior to installation.

Should  Landlord  order  and  /or  install  signage  per  Tenant's   request  or
instruction,  Tenant shall  reimburse the cost to Landlord within three (3) days
of installation.

Requests for approval for installation of Tenant  identification signs should be
submitted in writing to the Executive Center of Simi Valley,  Attention Property
Manager:  Helen Lamont.  Please allow 10 working days for  processing.  Indicate
Tenant name and suite number on all correspondence.

                                      E-19
<PAGE>
                                                                  Exhibit 23 (a)

            Consent of Independent Registered Public Accounting Firm




We consent to the  incorporation  by reference  in  Registration  Statement  No.
333-51774 of PerfectData  Corporation  on Form S-8 of our report,  dated May 14,
2004, appearing in this Annual Report on Form 10-KSB of PerfectData  Corporation
for the year ended March 31, 2004.




SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Los Angeles, California
June 28, 2004













                                      E-20

<PAGE>


                                                                  Exhibit 23 (b)



            Consent of Independent Registered Public Accounting Firm


The Board of Directors
PerfectData Corporation:

We consent to  incorporation  by reference in the  registration  statement  (No.
333-51774) on Form S-8 of  PerfectData  Corporation  (the Company) of our report
dated May 9, 2003,  except for the  restatement for  discontinued  operations as
described in note 2 to the 2003  financial  statements,  which is as of June 25,
2004, with respect to the statements of operations,  shareholders'  equity,  and
cash  flows of the  Company  for the year ended  March 31,  2003,  which  report
appears  in the March 31,  2004  annual  report  on Form  10-KSB of  PerfectData
Corporation.

/s/ KPMG LLP

Los Angeles, California
June 25, 2004











                                      E-21


<PAGE>


                                                                    Exhibit 99.1

                    Certification of Chief Executive Officer
                          Pursuant to Rule 13-14 under
                       the Securities Exchange Act of 1934

         I, Harris A. Shapiro, certify that:

         1. I have  reviewed  this annual  report on Form 10-KSB of Perfect Data
         Corporation;

         2. Based on my  knowledge,  this  report  does not  contain  any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances  under which
         such  statements  were made, not misleading  with respect to the period
         covered by this report;

         3. Based on my knowledge, the financial statements, and other financial
         information  included in this  report,  fairly  present in all material
         respects the financial condition,  results of operations and cash flows
         of the small business  issuer as of, and for, the periods  presented in
         this annual report;

         4. The small business  issuer's other  certifying  officer(s) and I are
         responsible for  establishing and maintaining  disclosure  controls and
         procedures  (as defined in Exchange Act Rules  13a-15(e) and 15d-15(e))
         and internal  control over financial  reporting (as defined in Exchange
         Act Rules  13a-15(f) and 15d-15(f))  for the small business  issuer and
         have:

         a)       Designed such disclosure  controls and  procedures,  or caused
                  such  disclosure  controls and procedures to be designed under
                  our supervision,  to ensure that material information relating
                  to the  small  business  issuer,  including  its  consolidated
                  subsidiaries,  is made  known  to us by  others  within  those
                  entities,  particularly during the period in which this report
                  is being prepared;

         b)       Designed such internal  control over financial  reporting,  or
                  caused such internal  control over  financial  reporting to be
                  designed  under  our   supervision,   to  provide   reasonable
                  assurance regarding the reliability of financial reporting and
                  the preparation of financial  statements for external purposes
                  in accordance with generally accepted accounting principles;

         c)       Evaluated the  effectiveness  of the small  business  issuer's
                  disclosure  controls  and  procedures  and  presented  in this
                  report  our  conclusions   about  the   effectiveness  of  the
                  disclosure  controls  and  procedures,  as of  the  end of the
                  period covered by this report based on such evaluation; and

         d)       Disclosed  in this  report  any  change in the small  business
                  issuer's  internal  control  over  financial   reporting  that
                  occurred during the small business issuer's most recent fiscal
                  quarter (the small business  issuer's fourth fiscal quarter in
                  the case of an annual report) that has materially affected, or
                  is reasonably likely to materially  affect, the small business
                  issuer's internal control over financial reporting; and

                                      E-22

<PAGE>

         5.       The small business issuer's other certifying  officer(s) and I
                  have  disclosed,  based  on  our  most  recent  evaluation  of
                  internal  control  over  financial  reporting,  to  the  small
                  business  issuer's  auditors and the audit  committee of small
                  business  issuer's  board of directors (or persons  performing
                  the equivalent functions):

         a)       All significant  deficiencies  and material  weaknesses in the
                  design  or  operation  of  internal   control  over  financial
                  reporting which are reasonably  likely to adversely affect the
                  small business issuer's ability to record, process,  summarize
                  and report financial information; and

         b)       Any fraud,  whether or not material,  that involves management
                  or other  employees who have a  significant  role in the small
                  business issuer's internal control over financial reporting.


         Date:    June 28, 2004


                                                /s/ Harris A. Shapiro
                                                Harris A. Shapiro
                                                Chairman of the Board and
                                                Chief Executive Officer
















                                      E-23
<PAGE>


                                                                   Exhibit 99.2

                    Certification of Chief Financial Officer
                          Pursuant to Rule 13-14 under
                       the Securities Exchange Act of 1934

         I, Irene J. Marino, certify that:

         1. I have  reviewed  this annual  report on Form 10-KSB of Perfect Data
         Corporation;

         2. Based on my  knowledge,  this  report  does not  contain  any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances  under which
         such  statements  were made, not misleading  with respect to the period
         covered by this report;

         3. Based on my knowledge, the financial statements, and other financial
         information  included in this  report,  fairly  present in all material
         respects the financial condition,  results of operations and cash flows
         of the small business  issuer as of, and for, the periods  presented in
         this annual report;

         4. The small business  issuer's other  certifying  officer(s) and I are
         responsible for  establishing and maintaining  disclosure  controls and
         procedures  (as defined in Exchange Act Rules  13a-15(e) and 15d-15(e))
         and internal  control over financial  reporting (as defined in Exchange
         Act Rules  13a-15(f) and 15d-15(f))  for the small business  issuer and
         have:

         e)       Designed such disclosure  controls and  procedures,  or caused
                  such  disclosure  controls and procedures to be designed under
                  our supervision,  to ensure that material information relating
                  to the  small  business  issuer,  including  its  consolidated
                  subsidiaries,  is made  known  to us by  others  within  those
                  entities,  particularly during the period in which this report
                  is being prepared;

         f)       Designed such internal  control over financial  reporting,  or
                  caused such internal  control over  financial  reporting to be
                  designed  under  our   supervision,   to  provide   reasonable
                  assurance regarding the reliability of financial reporting and
                  the preparation of financial  statements for external purposes
                  in accordance with generally accepted accounting principles;

         g)       Evaluated the  effectiveness  of the small  business  issuer's
                  disclosure  controls  and  procedures  and  presented  in this
                  report  our  conclusions   about  the   effectiveness  of  the
                  disclosure  controls  and  procedures,  as of  the  end of the
                  period covered by this report based on such evaluation; and

         h)       Disclosed  in this  report  any  change in the small  business
                  issuer's  internal  control  over  financial   reporting  that
                  occurred during the small business issuer's most recent fiscal
                  quarter (the small business  issuer's fourth fiscal quarter in
                  the case of an annual report) that has materially affected, or
                  is reasonably likely to materially  affect, the small business
                  issuer's internal control over financial reporting; and

                                      E-24
<PAGE>


         5.       The small business issuer's other certifying  officer(s) and I
                  have  disclosed,  based  on  our  most  recent  evaluation  of
                  internal  control  over  financial  reporting,  to  the  small
                  business  issuer's  auditors and the audit  committee of small
                  business  issuer's  board of directors (or persons  performing
                  the equivalent functions):

         a)       All significant  deficiencies  and material  weaknesses in the
                  design  or  operation  of  internal   control  over  financial
                  reporting which are reasonably  likely to adversely affect the
                  small business issuer's ability to record, process,  summarize
                  and report financial information; and

         b)       Any fraud,  whether or not material,  that involves management
                  or other  employees who have a  significant  role in the small
                  business issuer's internal control over financial reporting.


         Date:    June 28, 2004



                                      /s/ Irene J. Marino
                                      Irene J. Marino
                                      Vice President, Finance,
                                      Chief Financial Officer and
                                      Chief Accounting Officer












                                      E-25

<PAGE>







                                                                    Exhibit 99.3

                      Certification Pursuant to Section 906
                          of Sarbanes-Oxley Act of 2002

         We,      Harris A. Shapiro and Irene J. Marino, do hereby certify that:

         1.  This  annual  report  of  PerfectData  Corporation  containing  the
         financial  statements for the years ended March 31, 2004 and 2003 fully
         complies  with the  requirements  of  section  13(a) of the  Securities
         Exchange Act of 1934 (15 U.S.C. 78m) and

         2. The information  contained in this annual report fairly presents, in
         all  material  respects,   the  financial   condition  and  results  of
         operations of PerfectData Corporation.



         Date:    June 28, 2004


                                   /s/ Harris A. Shapiro       _
                                   Harris A. Shapiro
                                   Chairman of the Board and
                                   Chief Executive Officer




                                    /s/ Irene J. Marino_
                                    Irene J. Marino
                                    Vice President, Finance,
                                    Chief Financial Officer and
                                    Chief Accounting Officer









A signed  original of this  written  statement  required by Section 906 has been
provided  to  PerfectData  Corporation  and  will  be  retained  by  PerfectData
Corporation and furnished to the Securities and Exchange Commission or its staff
upon request.


                                      E-26

<PAGE>