PVS's financial condition improved substantially during October due primarily to the fact PVS has already processed over 4300 registrations of various types for the 2004 registration year -- this is well over 50% of what we expect to process for the entire year. While PVS's reported condition improved by over $221, 000, this does not reflect (since PVS does its accounting on a cash basis) the fact we owe USA Swimming $135,055 for their share of the registration fees we have already collected. We expect to be billed for and pay this amount in November.

John Ertter and John Hirschmann met with the auditor Sarfino and Rhoades LLP on October 16 to initiate the audit. Fees will be billed on an as incurred basis. The auditor has estimated that the cost will be close to what was provided for in PVS's 2004 budget. The actual audit is underway. John Ertter and John Hirschmann have already responded to requests for additional information from the auditor. The audit is expected to be completed by December 15.